Manchester Monitor August 2014

Manchester Monitor August 2014 Office take-up in Greater Manchester surging

Labour market performance remains strong Office take-up at a four-year high Weekdays continue to boost hotel occupancy House price rises are slowing down www.neweconomymanchester.com research@neweconomymanchester.com

Monitor Focus Office take-up in Greater Manchester surging Greater Manchester (GM) is performing strongly, with office take-up now standing at a four-year high according to the latest figures from DTZ. The positive outlook for GM is in line with that for the rest of the UK, with the Office for National Statistics (ONS) confirming the national economy grew by 0.8% in the second quarter of 2014. Overall, GDP grew by 3.1% compared with Q2 2013. This means the UK economy has finally exceeded its pre-crisis peak recorded in the first three months of 2008. However, there is scant evidence of any rebalancing towards manufacturing, as service industries remain the largest and steadiest contributor to economic growth and the only component of GDP with output exceeding the pre-downturn peak.

The latest assessment of the property market from DTZ shows that office take-up levels in Manchester city centre reached a four-year high of 484,400 sq. ft., growing at a rapid pace since the final quarter of 2013. The increase from Q1 alone was 52.5%, although take-up levels still fall short of the peak of 674,400 sq. ft. of Q3 2010. Headline prime rents reflect the high take-up levels as rent prices increased for the first time since Q4 2011. New developments such as the nearly completed 1 St Peter’s Square are already meeting this high level of demand. Office space availability is expected to fall for the rest of the year as take-up gathers pace.

The strong outlook continues in the visitor economy with both airport passenger numbers and hotel occupancy rates increasing. Weekdays continue to boost hotel occupancy with rates increasing 1.8 percentage points from May to reach 78.5% in June in Manchester city centre. The Tuesday and Wednesday of 24-25 June hit a 98% occupancy rate in the city centre, also reached on the first weekend of June, when the Parklife Big Weekender took place at Heaton Park.

The overall hotel occupancy rate increase across the conurbation was 1.5 percentage points compared to the previous month and stood at 78.1%.

May brought more than 2.0 million passengers to Manchester Airport according to the data from the Civil Aviation Authority. On monthly terms this is a 19.9% increase on the previous month. Manchester Airport reported the largest annual increase in passenger numbers compared to all other major airports in England. Overall, passenger

1 | Manchester Monitor – August 2014

numbers were boosted by two long bank holiday weekends in May together with school holidays. Some new destinations were added to the 200 connections already available, with Air Canada Rouge’s new non-stop flight to Toronto and five new winter destinations from Ryanair: Barcelona, Lisbon, Fuerteventura, Gran Canaria and Shannon.

The continuingly improving visitor economy is seen as another indicator of the strong economic recovery, as holidaymakers head abroad for their holidays and business travel picks up. Labour market statistics reflect the economic outlook and show that unemployment continues to fall across the conurbation, with around 51,900 people claiming Jobseeker’s Allowance (JSA) in June. This leaves the unemployment rate at 3.0% of the resident working age population and the number of claimants is now 34.5% lower than in June 2013. However, unemployment analysis based on JSA claimant count is becoming increasingly challenging due to the impact of areas piloting Universal Credit. Several thousand people are currently excluded from the total JSA count in GM because they are claiming Universal Credit.

However, even factoring these claimants into the figures, it is still the case that both the number of male and female claimants, as well as the number of long-term JSA claimants is falling. GM is performing particularly well in terms of youth unemployment, as the number of claimants aged 16-24 fell by 43.7% from June 2013.

House prices in the recent months – particularly in London and the South East – have been soaring up to record levels, raising alarms of a possibly looming housing bubble. The latest figures from the Land Registry however, show that house prices in GM experienced a slight fall for the first time since June last year in monthly terms. A similar development was recorded in England & Wales with house prices remaining largely stagnant. The average house in GM cost £106,300 in June 2014, which is still 4.7% more than in June 2013. Despite the overall turn in terms of house prices in GM, prices increased in all the individual local authorities.

The number of house sales increased month-on-month only 0.4% in GM, exceeded slightly by the North West at 1.0% and England & Wales at 1.2%.

Monitor Dashboard Jobseeker’s Allowance (JSA) claimants

Airport Passengers





34.5%

7.3%

since last year

since May 2013

Office property take-up

Hotel Occupancy



52.5% in GM since Q1 2014



0.5%pts Average occupancy rate in GM was 78.1%, down from 78.6% on the previous 12 months

House Prices



4.7% since June 2013

Manchester Monitor – August 2014 | 2

People Monitor Labour market continues to perform well The latest figures show that around 51,900 people were claiming Jobseeker’s Allowance (JSA) in Greater Manchester (GM) in June 2014 – a decrease of 3,900 (7.1%) when compared with the figure of 55,800 for May. Overall, the number of JSA claimants in GM is 27,400 lower (34.5%) than 12 months ago. Average wage increases remain relatively low.

JSA Claimants Around 3.0% of the resident working age population in GM were claiming JSA in June. This rate is slightly higher than in the North West (2.7%) and Great Britain (2.4%), reflecting the longer term trend of the conurbation having a higher JSA claimant rate. The very large falls in claimant count should be treated with increasing caution due to the impact of Universal Credit, which has knocked a few thousand people off the JSA count. This will no longer be the case once the Office for National Statistics starts reporting Universal Credit data and the JSA claimant count is discontinued.

The number of male JSA claimants in GM fell on a monthly basis by 7.5% (2,700) to 33,500, while the number of female claimants decreased 6.3% (1,240) to 18,400. This is in line with the annual JSA figures for males and females, which are also decreasing. The year-on-year fall in GM for male claimants was 19,400 (36.6%) and 8,010 (30.3%) for female claimants.

Youth unemployment (JSA claimants aged 16-24) in GM decreased 8.6% on a monthly basis, falling from 12,720 to 11,630. On an annual basis, the number of youth JSA claimants is now 43.7% (9,030) lower than this time last year.

Youth JSA claimant numbers have been falling faster than they have nationally. The 43.7% decline in GM compares to a fall of 36.4% in Great Britain.

There was also a decline in long-term (6 months+) claimants in GM in June 2014 to 24,800, down by 5.2% (1,360) on a monthly basis. In annual terms the number of long-term claimants has fallen by 35.1% (13,430), which is a marginally larger decrease than in the North West (-33.4%) but well ahead of the average of 31.7% in Great Britain.

At a national level, figures from the Office for National Statistics (ONS) show that employment increased by 254,000 for the three months to May 2014, compared with the previous quarter December 2013-February 2014. The number of unemployed people fell by 121,000 on the quarter and 383,000 on the year. Overall, these changes are in line with the general outlook of the labour market over the past two years. The employment rate reached 73.1% from March to May 2014, a level of employment last seen in the quarter of December 2004-February 2005. This means that the employment rate is at its highest level since the records began in 1971.

While the labour market outlook remains positive, average pay in Great Britain was 0.7% higher than a year earlier according to the most recent ONS data. This represents the lowest annual growth rate of average weekly earnings since 2001. Total pay including bonuses increased by 0.3%, the lowest rate total pay has grown by since 2009.

Vacancies Data There were 14,100 vacancies in GM in June 2014. Nearly two-thirds of GM based vacancies in June were situated in Manchester (68.2% or 9,600), followed by Stockport (6.1% or 860) and Bolton (4.7% or 670). The highest proportion of vacancies (35.9%) in June 2014 was in professional occupations – 5,100 jobs. Associate professional & technical roles (19.7%, or 2,800) was the second largest occupation group followed by administrative and secretarial occupations (10.5%, or 1,500). Skills cluster analysis reveals that the top three most sought after specific skills by GM employers for June 2014 were programming, development & engineering; business process & planning; and web design & technologies.

Jobseeker’s Allowance - Annual Change

Total Jobseeker’s Allowance Claimants in June 2014

51,905 Decreased by 34.5% year-on-year

Vacancies - Annual Change Women

Men

Youth

$30.3% $36.6% $43.7% $35.1%

$31.1% 1

Source: Labour/insight (Burning Glass Technologies)

3 | Manchester Monitor – August 2014

Long-term

Business Monitor Office Take-Up and Availability in Manchester (sq. ft.)

4,000,000

600,000

3,500,000 500,000

400,000 2,500,000 2,000,000

300,000

1,500,000 200,000

Take Up (sq. ft.)

Availability (sq. ft.)

3,000,000

1,000,000 100,000 500,000 0

Availability

214 Q

114 Q

413 Q

Q

313

213 Q

113 Q

412 Q

212 Q 312

Q

112 Q

411 Q

311 Q

211 Q

Q

111

0

Take-Up

Office take-up figures highest in four years According to DTZ’s latest assessment of the property market, office take-up levels in Manchester city centre were at a four year high in the second quarter of 2014, having been recorded at almost 485,000 sq. ft. Consequently, headline prime rents saw the first increase since the final quarter of 2011.

Overall take-up in the city centre has been increasing since Q4 2013, growing at a rapid pace from 180,000 sq. ft to almost 485,000 sq. ft. in Q2 2014 (304,000 sq. ft.). On a quarterly basis office take-up increased by 52.5% or 167,000 sq. ft. from Q1 2014. While take-up is now on the highest level in four years, it still falls short of the Q3 2010 high of 674,000 sq. ft.

Availability of office space decreased slightly and stood at 2.6 million sq. ft. in Q2 2014. This is a 2.9% decrease from the first quarter of 2014 – still remaining roughly at the same level as in Q3 and Q4 of 2013. Take up in Q2 2014 was spread fairly evenly between grade A and grade B deals, totalling 802,000 sq. ft. for the first half of the year. Further supply is expected later in the year as a number of key developments such as 1 St. Peter’s Square approach completion. The first tenant in the 13 storey building at One St Peter’s Square is KPMG, which has increased its take up of 63,000 sq. ft. with an additional 10,500 sq. ft.

There are several future developments in Manchester, such as The Cotton Building, which is due to be completed in December 2015. Detailed planning permission has recently been gained for a new grade A office building on the site of the former Exchange railway station, opposite Manchester Cathedral with completion scheduled for July 2016.

The slight fall in availability corresponds previous forecasts, with sharper falls in grade A availability expected for the rest of the year, despite further prospective developments such as 2 St. Peter’s Square offering a possible 40,000 sq. ft. of new space in the city centre. The current prime rent for office space in Manchester is £32 per sq. ft., which is a 6.7% increase from £30.00 in Q1 2014, having remained unchanged since Q4 2011. Rents have increased substantially more in Manchester than in other major UK cities and are now higher than in Birmingham, Bristol, Cardiff, Edinburgh, Glasgow and Leeds.

Manchester Monitor – August 2014 | 4

Place Monitor Weekday visitors boosting hotel occupancy Airport passenger numbers and hotel occupancy continue to show that the visitor economy is performing well, a trend that should continue during the traditionally busy summer holiday months. Hotel occupancy figures for June were boosted with weekday visitors, while airport passenger numbers are still rising, with more than 2 million passengers using the Airport in May. Hotel Occupancy Hotel occupancy rates in Manchester city centre increased from the figures recorded in June 2014. The occupancy rate for June stood at 78.5% which is a 1.8 percentage point increase from the previous month. The June rate remains above the 74% average from 2000-2013, which has been a strong trend in 2014 so far.

Occupancy rates across GM increased slightly less by 1.5 percentage points from the previous month to 78.1% in June. In annual terms, the GM rate fell only slightly behind the 2013 figure of 78.6%.

Manchester city centre occupancy rates for June were higher during the weekdays, which reverses the trend of the previous three years of strong weekend rates. Overall, the occupancy rates for both the city centre and GM are similar to June 2013. The average hotel occupancy rate for 2014 so far stands at 75%, one percentage point higher than the 2013 average of 74%.

Key dates for hotel occupancy in the city centre during June were:

• 18 June – 96% occupancy rate was achieved as the British Society of Gastroenterology conference took place at Manchester Central and Kings of Leon performed at the Phones 4u Arena.

Airport Passenger Numbers Manchester Airport handled more than 2 million passengers in May 2014 according to the data from the Civil Aviation Authority. This represents an increase of 19.9% (338,000) on the previous month. In annual terms passenger numbers increased by 7.3% (137,800), which reflects new routes and the 2.6% increase in the number of passenger flights.

Heathrow saw an annual increase of 2.2% in passenger numbers in May 2014, with increases recorded also at both Gatwick Airport (6.5%) and Birmingham (5.5%).

More than 7.6 million passengers have travelled via Manchester Airport from January to May 2014 as the Airport reached 21 million passengers on a 12 month rolling basis.

The passenger numbers were boosted by the two long bank holiday weekends in May, along with the school half-term break. Future data are expected to confirm that the last weekend of July will have been the busiest weekend for the Airport, with over 320,000 passengers expected to pass through the doors as the summer holiday period begins across the wider region.

• 24 & 25 June – 98% occupancy was achieved on these weekdays, boosted by the Chartered Institute of Housing conference at Manchester Central, which attracted over 1,000 delegates on both days and the British Gas International Swimming Meet at Manchester Aquatics Centre, which also took place on both Tuesday and Wednesday. The Eagles also performed at the Phones 4u Arena on the Wednesday.

New destinations from Manchester Airport include Air Canada Rouge’s new non-stop service to Toronto Pearson International Airport, operating five times per week.

• 7 & 8 June – occupancy of 98% was measured for Saturday and 95% for the Sunday. The two major events taking place this weekend were both two day events: the Parklife Big Weekender festival took place at Heaton Park and the Ideal Home Show was held at Eventcity.

The budget airline Ryanair has also announced five new destinations – Barcelona, Lisbon, Fuerteventura, Gran Canaria and Shannon. This increases Ryanair’s total number of routes from Manchester to 24 once the routes become operational this winter.

Hotel occupancy (city centre)

(+0.9% pts)

Airport passenger numbers

(+7.3%)

78.5%

2,038,370

Hotel occupancy (GM)

Flights

(-0.5% pts)

78.1%

(2.5%)

15,369 % represents year-on-year change

IMPORTANT NOTE: The source of the hotel occupancy data referenced in this newsletter is STR Global Ltd. Republication or other reuse of this data without the express written permission of STR Global is strictly prohibited.

5 | Manchester Monitor – August 2014

Housing Monitor Average house prices in GM, June 2014 Trafford average = £188,811

£200,000

England & Wales average = £172,011 £160,000

GM average = £106,248 £120,000

Oldham average = £83,335

£80,000

£40,000

O ld ha m

Ro ch da le

ig an W

n Bo lto

es id e Ta m

Sa lfo rd

M an ch es te r

G M

Bu ry

kp or t St oc

Tr af fo r

d

£-

House price rises are slowing down Land Registry data show that the average house in GM cost £106,250 in June 2014, an increase of 4.7% (£4,778) from this time last year. The rise still remains below the increase in prices in England & Wales as a whole: 6.4% (£10,295), reaching £172,000. On a monthly basis, house prices fell slightly in June, for the first time since June 2013 in GM. House Prices Property prices in GM have remained virtually the same when analysing price changes between May and June.

House prices in the North West are growing at a moderate pace, recording a 2.2% (£2,344) year-on-year increase. This is below the annual increase of prices in GM, but the slight monthly decrease of 0.4% (£401) across North West shows that the housing market in the wider region reflects recent national development in the housing market.

Looking at individual local authorities in GM shows that house prices are on the rise in annual terms in all districts with the smallest increases measured in Tameside and Bolton. Prices in Tameside increased by 1.8% (£1,664) and in Bolton by 2.5% (£2,203). The largest increase was recorded in Oldham where prices rose 9.2% (£7,028) in annual terms, followed by Salford (8.7% or £7,620); Stockport (7.8% or £10,795); and Trafford (5.4% or £9,592);

House sales House sales data from the Land Registry show that there were in total 2,800 properties sold in GM in April 2014, a low monthly increase of 0.4% (11). In the North West the number of sales fell slightly by 1.0% (73 fewer properties sold). The GM trend was more in line with the national perspective, where sales increased slightly by 1.2% (822) on a monthly basis.

The number of sales often creeps up during Spring, however, the trend seems to be slowing down from March to April.

Looking at year-on-year figures shows that overall, house sales in GM have increased by 32.9% (685) when April 2014 figures are compared with those for the same month in 2013.

This is slightly more than the increase in England and Wales (30.6% or 15,637) and matched by the North West, where sales increased by 32.9% (or 1,826).

Despite house prices having increased in all GM local authorities, the cost of properties varies still considerably across the conurbation. The average house price in Oldham is £83,300 compared to £188,800 in Trafford, for example.

Manchester Monitor – August 2014 | 6

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