Manchester has emerged as a leading regional office market in the United Kingdom thanks to its growing economy, favorable demographics, tight supply and devolved government.

Callum Hassall, a partner at law firm McGuireWoods London, says recent large office deals and growing positive sentiment among both prime office landlords and letting agents is pointing toward Manchester establishing itself as a top regional office location in the United Kingdom.

According to the Manchester Office Agents Forum, there was a significant increase in office take-up in the city in the third quarter of 2024. Bank of New York Mellon’s 196,000-square-foot (18,209-square-meter) takeover of office space at 4 Angel Square and ARM’s 69,000-square-foot (6,410-square-meter) deal at St Michael’s, the city’s new mixed-use redevelopment project, contributed to a total of 432,000 square feet (40,134 square metres) of office space being let in the third quarter, up from 332,000 square feet (30,944 square meters) in the second quarter.

“BNY’s new letting is the largest UK regional ‘Big Six’ city deal for four years, according to JLL,” said Hassall. “The building sits in the NOMA neighbourhood, where BNY will join the likes of Amazon and The Co-operative Group. It’s a massive deal for Manchester and once again showcases the city as an attractive investment prospect.”

With some 944,000 square feet (87,700 square meters) of office space has been let in Manchester in 2024, the Manchester Office Agents Forum envisions a strong end to 2024, with take-up expected to top 1.3 million square feet (120,773 square meters). It says this would exceed the five- and 10-year averages of 1.1 million square feet (102,193 square meters) and 1.24 million square feet (115,200 square meters) respectively.

Hassall says this demand has led to only some 600,000 square feet (55,742 square meters) to 700,000 square feet (65,032 square meters) of prime office space becoming available. “As a result, even if you look at conservative estimates of how much demand there is going to be for prime offices over the next couple of years, the consensus is that we’ve not got enough space coming to the market,” he said.

The effect on rent levels should be dramatic, believes Hassall. “At the beginning of this year, property agents were relatively confident that, over the next few years, headline rents in Manchester would hit £50 per square foot,” he said. “Now they’re even more confident and I suspect that we will hit this level sooner considering the scarcity of supply.”

The prime headline rent in Manchester increased in the second quarter of 2024 to £44 per square feet, up from £43 in the first quarter. Savills now estimates that the limited supply of prime and grade-A stock means headline rents in Manchester will continue to grow by at least 18 percent to £52 ($60) per square foot by the end of 2028.

For Hassall, a recent report from Colliers that highlights the city’s strengths, shows that Manchester is well-positioned to outperform other U.K. regional markets. The Top UK Residential Investment Cities report says Manchester’s population is projected to increase by 1.14 percent annually during the next 10 years, while the city boasts the second highest student population behind London and has high university graduate retention rates. At the same time, there is a rising number of young professionals and entrepreneurs living in the city who are starting new businesses in a number of key industries, such as the tech sector.

“Manchester’s student population is one of the largest in Europe,” said Hassall “and it retains over 50 percent of its undergraduates who then set up a life in Manchester. London aside, the graduate retention rate is the highest rate out of all of U.K. cities — access to a thriving talent pool is obviously a major selling point.”

Hassall also extols the benefits of Manchester’s devolved government setup. “One of the things that Greater Manchester does incredibly well is devolution which provides more autonomy in areas in such as transport, planning and health. It’s also a place which has embraced regeneration which has been transformative and has cemented Manchester’s status as the United Kingdom’s second city,” he said.