Demand for office space soars as Manchester finds its civic heart

From the roof terrace of Manchester's newest office block, the scale of the city's resurgence becomes clear. A forest of skyscrapers stretches towards the hills beyond, with another thicket visible at Salford Quays, the northern home of the BBC.

Next door, machines smash into 1960s office blocks to make way for a new building. Below, workers complete the £180m revamp of St Peter's Square, with its refurbished Grade II listed library and town hall.

One St Peter's Square, across from the famous Midland Hotel, is the first big new speculative development to open since the economic crash.

"It sets a new standard of office accommodation in Manchester and is ready to support the growing demand from international businesses looking to relocate to the city centre," said Sir Howard Bernstein, chief executive of the city council.

"We've transformed the square back into the civic heart of Manchester," said Davinder Bansal, director of Glenn Howells architects, which designed the £65m, 13-storey building.

With a handsome stone colonnade rather than the typical steel and glass front, it was unveiled yesterday after a record year for office lettings in the city. The property consultant JLL said lettings had totalled 1.3m sq ft. A record £1.7bn was invested across Greater Manchester in 2014, putting it on a par with similar regional economic centres in Europe for the first time. Hamburg attracts an average £2bn annually.

Jon Neale, head of research at JLL, said: "The northwest, and Manchester in particular, is forecast to see very strong office employment growth in the short to medium term - exceeding London on some measures. Demand for office space in the city should remain strong - buoyed by 'Northshoring' as companies reconsider the costs associated with having large numbers of staff in the capital.

"Manchester has outperformed the other major regional cities for some time in terms of leasing volumes. This is testament to the leading role the city has taken in both regeneration and urban policy."

Manchester is electing a mayor in 2017 in return for gaining significant new powers over transport, skills and health.

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Average city centre rents have risen from £30 per square foot two years ago to £32.50. Private sector office jobs have grown by 5.1 per cent annually for the past five years, faster than Cambridge (4.2 per cent) and London (3.8 per cent).

JLL said there was scope for further building. Oxford Economics forecasts employment in the technology and professional services sectors will grow by 20 per cent during the next five years.

One St Peter's Square is only 44 per cent full. KPMG, the professional services firm, and DLA Piper, the law firm, are moving in while a restaurant fills the basement reception area.

Wealthy investors are putting their money into property as well as foreign funds. Fred Done, the Salford-born owner of the Betfred betting empire, and his brother Peter, are funding an £80m speculative tower block on St Peter's Square, which will replace four older buildings.

In another symbol of renewal, a huge new district whose development was stalled by the recession is about to be completed. Spinningfields, dubbed the "Canary Wharf of the North" is worth about £1.6bn. Allied London, the developer, has managed to sell on the entire 4m sq ft of office, retail and restaurant space while keeping the land so it can maintain the site.

Occupants include Bank of New York Mellon, Barclays, Pinsent Masons and the Royal Bank of Scotland.

MediaCom, the media agency, moved into a five-storey block six months ago.

Now the final building is under construction and has already been sold for £100m. It is the tallest office block to be built in the city since the Co-operative Insurance Tower in 1962.

Allied London will next begin transforming the former Granada TV studios into offices, a hotel, arts centre and apartments. Mike Ingall, chief executive, said: "We have a record and it is a location that works."

"Accountants and lawyers are consolidating some work outside London. They look at house prices in Manchester and Leeds compared with London and see them as a real alternative location."

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