The Society of Property Researchers recently held its first regional office market roundtable in Manchester, hosted by CoStar at the company’s 1 Marsden Street office.
CoStar’s Giles Tebbitts and Grant Lonsdale set the scene for a lively discussion, touching on the latest occupier and investment market insights.
The wide-ranging session was attended by Eric Chong of the British Council for Offices, Joanna Turner of Canada Life Investments, Matt Hayes of Knight Frank, Daniel Chetham of Savills, Joshua Woolnough of Cushman & Wakefield, Melanie Zhang of Northumbria University and Callum Hassall of McGuire Woods.
The UK’s regional office market is entering a new phase defined by refurbishments, selective development and a sharper focus on workplace experience. These were among several themes discussed by participants.
Attendees discussed the role of flex space, noting the lack of transparency in the managed workspace sector. Traditional landlords are now competing with dedicated operators as occupiers seek to contain costs and value the ability to expand their footprints without being tied into lengthy lease commitments.
The conversation later shifted to the so-called flight-to-quality and whether this has reversed somewhat recently in light of some occupiers becoming more cost-conscious and with the availability of top-end space in short supply in some markets.
Around two-thirds of new lettings in the Big Six cities over the past two years involved secondary space rated two or three stars, according to CoStar’s data, seemingly confirming tenant appetite for value-oriented accommodation.
Anecdotally, some developers are responding by cutting back on "nice to have" amenities to focus on the basics. Health and well-being remain central to design, with indoor air quality and collaborative spaces high on occupier wish lists. Features like extensive bike storage are being scaled back due to low utilisation.
Post-pandemic office occupancy trends were debated, including diverging office use patterns between London and the regional cities. While Tuesdays to Thursdays are busiest in the capital, with Fridays notably quiet, Manchester, in particular, has retained a strong Friday culture.
Commute times and local occupier bases were cited as additional factors for the regional variation.
There was a consensus that new development remains challenging amid high construction costs and financing constraints, exacerbated by planning policy. While retrofitting is preferred to ground-up development, value-added tax on refurbishment projects is seen as a hindrance.
Offices’ high capital expenditure requirements relative to other sectors have become an additional deterrent for investors.
Despite these challenges, the Big Six regional office markets, which offer access to talent and lower living costs than London, remain largely resilient. Demand for office space, as measured by net absorption, has turned positive again and is expected to end this year on a relatively high note.
Looking ahead, sustainability, affordability and flexibility are likely to remain key considerations for occupiers and investors in today’s increasingly nuanced market.