It’s been a hive of activity at Piccadilly Place thanks to 90,000 bees that live on the...
2023: Market roundup
It’s been an interesting year for us and the industry, controlled in large by the steep hike in interest rates that no one saw coming. 2022 came and went with its own challenges, and many of us felt or rather hoped that 2023 would ease.
Also interesting for us as a developer this year, we’ve had some significant planning decisions go our way that have been the result of conscientious team work and strong partnerships, which continue to underpin our business model and reputation as a reliable developer.
Most anticipated word of the year: ‘Approved’
Reedham House is a long-standing office asset of ours and the opportunity to revitalise a prime commercial district in Manchester, and revive a building rich in history, is a privilege. It’s the type of design and place-making project we thrive on, this was a huge team effort with Jon Matthews Architects, and planning consultants Euan Kellie and Counter Context to provide a stunning workspace and connecting public realm. We look forward to starting on site in 2024.
Our site of the former Renaissance hotel on Deansgate also passed with flying colours through planning for not one but two elements of the masterplan with our esteemed JV partner, Starwood Capital. Both the HQ-style office and luxury apartment schemes were granted planning consent by Manchester City Council in Summer, with the hugely anticipated first 4* Treehouse Hotel outside of London due to complete in Spring 2024.
With our Upper Brook Street masterplan due for planning by the end of the year, we have an anticipated £824m GDV development portfolio in the city centre.
Delivering the goods
Staying on positive highlights of the year, our asset management team also made 2023 an interesting year, working on our industrial portfolio and bringing forward strategic refurbishment opportunities in established and well-connected locations. Both Morley Carr in Bradford and Lowton Business Park in Wigan demonstrated our in-house deliverability capabilities. The sites were identified, and coordinated with our partners Pitalia Estates and Together Money, we undertook refurbishment works to provide high-quality warehouse and logistics space at a time of increased market demand.
We never underestimate the strength of our 30-year experience in industrial and asset management, which continues to be the backbone of our business, and ultimately supports major development.
Alliance by name, alliance by nature
A particular highlight for us this year, has been the progress and forming of new partnerships. Working with Funds, financial vehicles and developers is fundamental to our strategic success and ability to unlock sites and key asset management and occupier opportunities.
Moda Living is bringing forward the student accommodation at our Upper Brook Street masterplan, with an equally progressive and high-quality emphasis on design. The collaboration works well and we are excited to create this significant community regeneration project with them.
Meanwhile, our partnership with Starwood has seen a positive few months, with the Renaissance site gaining two consecutive planning consents for the residential and commercial elements of the scheme. Renaissance is a significant scheme for the city centre, the last remaining area that was affected by the IRA bomb, to be regenerated and brought back to its former prestige.
On the industrial side, working with Pitalia helped us efficiently turn around Lowton Business Park, from acquisition to realising the investment vehicle to bring forward high quality warehouse, storage and office space. We see the partnership as a longer-term opportunity, sharing our regional knowledge and expertise.
Which markets showed interest?
For us, we’ve seen most activity in industrial, both delivery of tailored tenant space and new lettings throughout the year. With the acquisition of Lowton Business Park and Morley Carr and subsequent refurbishments, we have been able to meet demand for industrial and storage space and realise the benefit of our strong portfolio.
In part, our existing office portfolio has also performed well, with the likes of Stamford Green and Westgate in south Manchester suburbs continuing to attract small and growing businesses. Our Leeds city centre building has secured multiple lettings in 2023, again, testament to our occupier relationships and a strong understanding of what workspace they need. Large scale HQ office lettings are few and far between, some businesses have continued to work in their hybrid states, or are recovering from post-pandemic factors, and not least the decline in economic growth.
We are very close to the residential market, both city living and student accommodation, and have seen the impact the demand for living space from students and international professionals is having on Manchester prices. Rents have risen at a significant rate, with a further 20% increase on prime rents. Meanwhile, there is low availability of good quality accommodation. And that’s where we hope to come into play, alongside Moda at Upper Brook Street, introducing a new standard in student living.
The challenges of inflation impacted development during 2022, and there was anticipation that cost pressures would ease off in 2023, allowing works to resume or commence on sites and reassure funders. No one saw the significant increase in interest rates coming, and subsequent sizeable shift in sentiment from funders. Ultimately, major development starts have paused and have been largely wiped out this year.
The Treehouse hotel is expected to complete in Spring 2024, the first element of the Renaissance scheme was already well underway before costs increased, and the commitment to build has stood us in good stead to reassure our partners. We expect early 2024 to be an important and progressive time, when positive funding conversations resume.
Despite complexities around funding of new developments, we have remained busy focussing on deliverability. Upper Brook Street public consultations and submission of plans, as well as Reedham House planning consent, have been the result of much hard work and forward-thinking to ensure there are high quality developments in the pipeline that will impact on economic growth of the city. We feel confident we have attractive assets for funders when the market is ready to pick back up.
Added to the Renaissance scheme, we have three of the best sites in Manchester that will commence on site in 2024, with the residential and office buildings at Renaissance due to start in Q1 and – subject to planning – Upper Brook Street would start in Q2 2024.
We’ve seen great success in smaller refurbishment opportunities - light industrial, logistics and storage – where we can benefit from our in-house asset management. We will actively seek further sites like this where we can add value and work with like-minded financial and development partnerships to supply quality workspace for growing and ambitious businesses.
We are also committed to ESG standards in our buildings, both retrospectively and in development. In 2024, the team will continue to work with our environmental technology partners to implement smart energy monitoring to accurately gauge and reduce energy usage.
Realistically, no one expects 2024 to get off to a flying start, but hopefully January will be a period of stabilising. We are in a great position with conversations pencilled in so that when doors do start opening from February time, we will be ready to discuss opportunities and robust funding programmes to help the economy get moving again.
Discussions suggest there is funding ready to invest, in lighter sheds and beds (student accommodation in particular). There is demand in the market and we are excited to be a forerunner to provide the high standard of design and infrastructure to play our part in the commercial property landscape in Manchester and beyond.
*Alex's comments were featured as part of PlaceNorthWest's article on sectors and development we expect to see in 2024.