The Manchester City property market is becoming increasingly attractive to investors for mid-rise office property. Active leasing activity over the past few years has consumed most of the City's Grade A office stock and this has resulted in a significant shortage of such office space available for sale by the end of the year. Currently, there are approximately 230,000 sq ft of Grade A office space available in Manchester City Centre. Two projects at St Peter's Square were available for completion and full occupancy in the second quarter, with a further 784,000 sq ft of Grade A office space under construction, of which 250,000 sq ft is pre-let.
The City's property market is highly competitive with overall rental levels at around £35 per sq ft, but with no new buildings due for completion until 2018, rents are expected to continue to rise and could soar to £40 per sq ft for Grade A office space in 10 years' time. With limited stock of Grade A office space, demand for more junior office space will also rise, pushing Manchester student apartments up secondary rents. As a result, rents for Grade B office space in Manchester City Centre are likely to rise by 10% year on year and are currently at £27 per sq ft.
In addition, the level of investment transactions in the City's office market was flat in the first and second quarters of the year, with £170 million of transactions. The largest transaction in the second quarter was the acquisition of CIS Tower, formerly the headquarters of the Co-operative Group and once the UK's tallest building, by Castlebrooke Investments for £66 million.