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Ben Roberts Partner
Cushman & Wakefield
The Agent’s Perspective
Guest Speakers
North West Branch Networking Breakfast Thursday 26 February 2015 7:30am
Radisson Blu Edwardian Hotel, Peter Street, Manchester
Will Lewis Director
OBI Property
Simon Binns Heart of Manchester BID Manager
CityCo
GREATER MANCHESTER
INVESTMENT MARKET
FEBRUARY 2015
Ben Roberts
Head of Cushman & Wakefield Manchester Office
GREATER MANCHESTER
INVESTMENT MARKET
27 CUSHMAN & WAKEFIELD
THE GREATER MANCHESTER INVESTMENT MARKET
Ben Roberts
AGENDA
• The current UK economic situation
• The UK commercial property market
• Manchester City Centre office investment market
• The Greater Manchester industrial market
• The Greater Manchester retail market
• Market predictions
BEN ROBERTS
Head of Cushman & Wakefield Manchester Office
Partner in Capital Markets Team
Buying and selling commercial investment properties throughout the North of England
GREATER MANCHESTER
INVESTMENT MARKET
28 CUSHMAN & WAKEFIELD
THE MACRO ECONOMIC SITUATION
• Europe’s fastest growing economy
• 2014 was the best year for the economy since 2007
• A service sector led recovery
• A construction sector which is accelerating despite a small blip in Q4 2014
• Inflation at its lowest rate for 20 years
• Unemployment still falling
• Long awaited Real Wage Growth
“The Feel Good Factor”
GREATER MANCHESTER
INVESTMENT MARKET
29 CUSHMAN & WAKEFIELD
UK INVESTMENT VOLUMES
Investment by sector
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
UK
Inv
estm
ent,
£m
illi
on
Office Unit Shop Shopping Centre Retail Warehouse Industrial Leisure Other
Source: Property Data
GREATER MANCHESTER
INVESTMENT MARKET
30 CUSHMAN & WAKEFIELD
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Retail Prime Initial Yields (RHS) Industrial Prime Initial Yield Office Prime Initial Yield GB 10Year+
REAL ESTATE / BOND RELATIONSHIP
Manchester Prime Yields by Sector Vs. 10 Year Government Bonds
Source: IPD Quarterly Index Q4 2014 / Oxford Economics
Retail – 290 bps
Industrial – 340 bps
Office – 315 bps
GREATER MANCHESTER
INVESTMENT MARKET
31 CUSHMAN & WAKEFIELD
MANCHESTER CITY CENTRE INVESTMENT MARKET
The Review – Office Investment 2014
RBS BUILDINGS, SPINNINGFIELDS
£318,390,000 reflecting 4.8% NIY
CITY TOWER, PICCADILLY PLACE,
MANCHESTER
£132,000,000 reflecting 6.75% NIY
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014
OFFICE INVESTMENT
GREATER MANCHESTER
INVESTMENT MARKET
32 CUSHMAN & WAKEFIELD
1. 186 Deansgate
2. Churchgate & Lee House
3. Arkwright House
4. City Tower
5. St James House
6. Direct Line House
7. St Georges House
8. RBS Buildings
9. Elliot House
10. Free Trade Exchange
11. 1 Piccadilly Gardens
12. Chancery Place
13. Ship Canal House
14. 52 Princess Street
15. Merchant Exchange
16. Peter House
17. 4 Hardman Square
OFFICES
1
3
5
6
7
10
11 12
15
16
17
9
4
8
8
13
14
SPINNINGFIELDS
PICCADILLY
MANCHESTER CITY CENTRE INVESTMENT MARKET
Key Deals – Offices 2014
TRADITIONAL PRIME CORE
2
GREATER MANCHESTER
INVESTMENT MARKET
33 CUSHMAN & WAKEFIELD
MANCHESTER CITY CENTRE INVESTMENT MARKET
The Purchasers in Manchester Office Market in 2014
0% 5%
82%
8% 5%
2014 DEALS
24%
8%
12%
15%
41%
2007 DEALS
£862 million – 20 Deals £719.3 million – 26 Deals
1%
5%
77%
14%
3%
2014 DEALS
Bank Irish Propco UK Propco UK Institution Overseas Private Opportunity Fund
GREATER MANCHESTER
INVESTMENT MARKET
34 CUSHMAN & WAKEFIELD
Why is Manchester City Centre the Dominant Regional UK Office market?
MANCHESTER CITY CENTRE INVESTMENT MARKET
• Annual take up
• External companies setting up City Centre offices
• Diversity of occupiers
• Number of institutional Grade A opportunities
• Connectivity
• Diverse demographic
• Largest university campus in Europe
• Strength and the continuity of civic leadership
GREATER MANCHESTER
INVESTMENT MARKET
35 CUSHMAN & WAKEFIELD
The Review – Industrial Investment 2014
£ m
illi
on
GREATER MANCHESTER INDUSTRIAL INVESTMENT MARKET
PREMIER PARK, TRAFFORD
PARK
£19,250,000 reflecting 5.6% NIY
OMEGA SOUTH, WARRINGTON
£47,500,000 reflecting 7.5%
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014
INDUSTRIAL INVESTMENT
Greater Manchester Warrington
GREATER MANCHESTER
INVESTMENT MARKET
36 CUSHMAN & WAKEFIELD
The Investors – Industrial Deals
GREATER MANCHESTER INDUSTRIAL INVESTMENT MARKET
4%
32%
58%
[PERCENTAGE]
2014 DEALS
Private UK Proco UK Institution Overseas
20%
40%
40%
2007 DEALS
£270 million – 32 Deals £225.5 million – 22 Deals
GREATER MANCHESTER
INVESTMENT MARKET
37 CUSHMAN & WAKEFIELD
GREATER MANCHESTER INDUSTRIAL INVESTMENT MARKET
Return To Speculative funding
GRADE A SUPPLY
0
SPECULATIVE
DEVELOPMENT
GREATER MANCHESTER
INVESTMENT MARKET
38 CUSHMAN & WAKEFIELD
The Review – Retail Investment 2014
GREATER MANCHESTER RETAIL INVESTMENT MARKET
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014
RETAIL INVESTMENT
Greater Mancester
£ m
illi
on
1 KING STREET
£17,000,000 reflecting 5.98% NIY
THE ROYAL EXCHANGE
£43,225,000 reflecting 6.25% NIY
GREATER MANCHESTER
INVESTMENT MARKET
39 CUSHMAN & WAKEFIELD
RETAIL
1. 1 King Street
2. The Royal Exchange
3. 19-31 Piccadilly Place
4. The Avenue, 3 & 4 Hardman
Square,
and Left Bank
5. 86-88 Market Street
4
PICCADILLY
3
MANCHESTER CITY CENTRE RETAIL INVESTMENT MARKET
Key Deals – Retail 2014
4
4
4
SPINNINGFIELDS
2
1
RETAIL QUARTER
5
GREATER MANCHESTER
INVESTMENT MARKET
40 CUSHMAN & WAKEFIELD
GREATER MANCHESTER RETAIL INVESTMENT MARKET
The Investors - Retail Deals
£360 million – 22 Deals £510 million – 28 Deals
0% 8%
51%
24%
9%
8%
2007 DEALS
1%
5%
77%
14%
3%
2014 DEALS
Bank Irish Propco UK Propco UK Institution Overseas Private Opportunity Fund
GREATER MANCHESTER
INVESTMENT MARKET
41 CUSHMAN & WAKEFIELD
WHERE’S THE VALUE IN THE MARKET?
• Secondary buildings in prime locations in need of refurbishment
• Multi-let industrial estates and industrial “break up” opportunities
• Well located sites around larger conurbations
• Good secondary well configured retail units in larger centres
• Office to residential conversion opportunities in city centres
GREATER MANCHESTER
INVESTMENT MARKET
42 CUSHMAN & WAKEFIELD
PREDICTIONS FOR 2015
• Rental levels across all 3 commercial sectors are likely to rise
• Development funding will increase
• Foreign Capital investing in the UK to be similar level to 2014
• Benign macro-economic conditions
• Difficulty of finding stock
• Legacy portfolios continue to unravel
• Yields to harden and then level out
Overview
• Covers Manchester’s retail core
• 380 members – fashion retail, food & beverage,
financial services
• RV of £50,000 or above
• Levy of 1% of retailer’s business rates; capped at
£25,000
• Annual budget of £1m; five-year term
Remit
• Launching major new events in the city centre to
attract footfall
• Launching a city centre hosting scheme to improve
the customer experience
• Developing a stream of activity to boost midweek
and evening trade
• Delivering promotional campaigns and partnerships
to attract more affluent shoppers.
Setting up the BID
• Determine a timeline from consultation to ballot –
HoM was 18 months in the making.
• Highlight each key legal and government process,
shadow board meetings, business plan deadlines.
• Determine boundaries, number of levy payers,
estimated income.
• Engagement with key local businesses is crucial at
this stage, to ensure that the plans are endorsed by
the business community.
Manchester’s retail performance
• Second best performer in UK – worth £910m a year
• ‘Heritage’ brands that act as tourism magnets
• Increased tax free offering
• High spend international customers
• 75% of visitors to city come here to shop
Manchester’s retail performance
• Broad appeal – Selfridges to Primark
• Increased sales in menswear, footwear
• Rejuvenation of King Street
• Shrinking vacancy rate
• Manchester Arndale welcomed 41.5m customers in
2014
• Footfall performing well v national average, despite
challenges in sector
First Two Years - Highlights
• Giving retailers a stronger platform/voice in the city
• Introducing new events to the city centre (Dig the
City, Vogue)
• Expanding existing events for benefit of retailers
(students, Chinese New Year)
• Engaging more businesses in the city
First Two Years - Highlights
• Press and PR coverage for the city centre worth
more than £3m so far
• Work to reinvigorate King Street
• Delivering events that increased sales and footfall
for retailers
First Two Years - Highlights
• City Hosts:
1. Adding to the visitor welcome experience
2. More than 50,000 welcomes in first year
3. Capturing visitor data
4. Regular business visits to maintain relationship
with retailers
Retail trends
• Retailer expectation
• Pop up culture
• Loyalty – and brands are crucial to that
• Explosion of food and beverage sector
• Importance of events, cultural offer, sport, etc
• Shift away from out of town shopping
Next Steps
• Develop existing events programme to become self
sustaining
• Launch retail awards for members
• Promote Manchester as a desirable retail
destination via Marketing Manchester
• Work with property owners, agents and retail targets
Next Steps
• Benchmarking against other BIDs
• Continue to represent retail at a citywide level
• Be ‘the voice of retail’ in Manchester
• Go for a second term..!