Helical has exchanged contracts on the sale of the bulk of its Manchester office assets, at a marginal premium to the March 2020 and September 2020 book value. The grandly named Powerhouse Portfolio totals 342K SF and sold for £119M.

The portfolio includes three Manchester office assets — 245K SF at The Tootal Buildings, 49K SF at 35 Dale Street, and 48K SF at the Fairways next door.

Not, in itself, a big deal, although after a dire year it has significance: The real story here is that it reflects a defining moment in the city’s office and capital markets as 2020 ends and the opportunities of 2021 dawn.

Here are three reasons why.

1. This Is Just The Start

The sale to real estate funds managed by Pictet Alternative Advisors and XLB Property will not be the last to private equity, core-plus and value-add funds as 2021 dawns. Manchester rainmakers said well-resourced funds are circling the market looking for good quality, well located assets short of grade-A status with scope for active management. Many are aching to buy. In Birmingham up to £1.25B is said to be looking for a home. The same funds are looking in Manchester and the city's figure is at least comparable.

2. Manchester Is Keenly Priced

The disposal price of £119M reflects a blended net initial yield of 5.2% on the contracted rent and a blended capital value of £329/SF. Manchester yields for prime stock would likely be at least 75 basis points keener. But this is by no means a bad price for refurbished stock in a good and improving location. Investors are pricing Manchester as a city due for recovery.

3.  Hope Value Is Beginning To Be An Issue

This deal was agreed before it became clear that a coronavirus vaccine was likely to be successful. Today at least three vaccines appear to offer the prospect of success including the UK’s favoured choice, Oxford-AstraZeneca.

However, both buyers and vendors now have a difficult judgment call to make.

Vendors have a reason to soft-peddle on sales and harden their view of pricing, pending a return to normal if, as seems possible, UK vaccines are rolled out before Easter 2021.

Buyers, who thought they could enjoy softer pricing so long as the pandemic seemed endless, have every reason to act quickly before hope value gets out of hand.

This combination will have an effect in all markets but in Manchester, where confidence has been high, it could cause unusual distortions. H1 2021, which was always going to be peculiar, could get more peculiar as investors try to grab their chances and vendors harden their attitudes.