What northshoring has done for Manchester

Businesses that base themselves in Manchester rather than London enjoy cheaper rents, easier transport and access to a highly skilled workforce that can take advantage of more affordable housing

When law firm Freshfields Bruckhaus Deringer agreed to take 80,000 sq ft at One New Bailey in 2015, it signalled a vote of confidence for a stronger, growing Manchester. Since then, the idea of northshoring – businesses moving north to cut the cost of offices and labour in London – has persisted. Manchester’s image as a magnet for talent and business in particular continues, most recently with Barclays considering a 600,000 sq ft prelet in the city to build a North of England mega-campus. But are people and businesses really seeing Manchester as an alternative to work and life in London? And if they are, can the city handle the influx?

The truth about northshoring

Initially set up to fulfil back-office functions, the Freshfields Manchester office is now expanding and has started growing its legal team. That reflects a wider trend in the Manchester market, where businesses tend to start small before committing.

Rob Yates, partner at Cushman & Wakefield, says: “What people tend to do is move a vanguard, a toe in the water. If that works out well, they will move more.”

Despite recent growth, Manchester does not have the track record London has with larger firms – especially international ones. A sense of caution still prevails when these occupiers look to expand. Is there going to be enough talent? Can they do more than admin in the city?

Simon Bedford, partner and regional head at Deloitte Real Estate, says that it has expanded like many of its peers – through growth rather than relocation – and they have found that it does make sense because the talent does exist. “We all have hundreds more people here than we did a few years ago. We could have grown in London, but we didn’t,” he says.

But that does mean growth in Manchester is more subdued than some people assume. Chris Cheap, regional senior director at GVA, says: “Northshoring has been a trickle rather than a torrent over the years.”

But that the trickle might gain momentum from Brexit if it makes the regions look attractive compared with London, which is expected to bear the brunt of the UK’s exit from the EU.

A dearth of supply – or an opportunity?

Business expansion has fuelled demand for offices, and Yates estimates that there is 1m sq ft of active enquiries. The problem is that the city has delivered about that much in new stock in the past two years and 82% of it is already let.

Although the amount of office development in the city is continuing – about 1.5m sq ft is under construction, according to Deloitte – the majority of grade-A schemes, such as Bruntwood and Select Property Group’s 230,000 sq ft Circle Square and Barings Real Estate Advisors’ 180,000 sq ft Landmark, are expected to complete from mid-2019 onward. That means demand will continue this year with very little added stock to satisfy it.

Occupiers need to consider second-hand or refurbished space, which the Manchester Office Agents Forum said was an opportunity for landlords to deliver good-quality refurbishments. James Evans, head of Savills’ Manchester office, points to 11 Portland Street as an example of how desirable refurbished space can be. Rents have increased by 50% to £24 per sq ft since Aviva carried out its refurbishment in 2016 and those figures still leave room for growth in that market, considering headline rents at the end of 2017 were £34 per sq ft.

But Evans warns: “A challenge for the wider city will be to continue to offer a budget product that can cater to the tenant seeking more value space in Manchester.

“Traditionally the city has been strong at offering a range of office product coupled with a skilled workforce. It will be vital that inflation in both areas doesn’t mean the city loses its competitive advantage.”

Graduate retention

Regardless of how cost-effective it is to expand in Manchester, businesses would not do it if the talent did not exist in the city. Four universities are scattered around Greater Manchester with about 100,000 students in the area – and close to 400,000 within an hour’s drive.

Growing job opportunities mean students have more reason to stay and, according to the Centre for Cities, about 5% of all working UK graduates live in Manchester for six months after graduation. That is second to London’s 24% share.

Manchester’s graduate retention rate is also second only to London at 51.5%, and it draws in the second-highest number of graduates (3.8%) that move from their university towns after graduation.

An increasing number of people are also relocating from the capital to Manchester. The latest data available from Cushman & Wakefield shows that 4,150 London residents moved to Manchester in 2016 – up 27% on 2013. Julian Cotton, who heads the firm’s new homes team in Manchester, says the figure would have risen further in 2017.

Much of the migration to Manchester has been down to two age groups – 15- to 19- and 20- to 24-year-olds: those going to university and those relocating to Manchester after university. The number of people moving to the city in those demographics rose by close to 20% between 2013 and 2016.

Cotton says: “Although it’s a fraction of the size of London, Manchester now has an enormous amount of what London has to offer. I think people look at [Manchester] and think ‘Well, what are we getting in London? We can get stuck on the tube every morning for three-quarters of an hour – or we can do something different.’”


Can Manchester support its growing population?

As the Deloitte Crane Survey showed earlier this year, the residential market underpins construction activity in the city. More than 5,000 homes are set to complete this year, with a further 6,000 in 2019 and 2020.

PRS has taken off in Manchester, particularly with Moda’s Angel Gardens development and Patrizia’s 624-home build-to-rent scheme on First Street now under way. The sector is relatively new to the city and is part of the growth of city centre living, driven by young professionals, students and graduates who would rather live close to where they work.

The challenge for Manchester, then, is to continue to focus on placemaking. Colette McCormack, partner and head of law firm Winckworth Sherwood’s Manchester office, says: “We have pretty good graduate retention now in Manchester, but if we are going to attract more of the people and the skills that we need to build the economy, then we need those neighbourhoods and we need that good design.”

That includes tackling different kinds of tenure in and around Manchester. These include shared ownership, as Capital & Centric is doing in its Kampus development, and affordable PRS, as Sigma is doing in parts of Greater Manchester and in other parts of the North, including Liverpool.

Placemaking also means expanding the retail and leisure offering, which Manchester has done recently with brands such as The Ivy coming to the city for the first time. According to Deloitte, Manchester delivered 62,557 sq ft of retail and leisure in 2017 – a four-fold increase on 2016.

Rupert Barron, head of office agency at Avison Young in Manchester, says: “When I came to Manchester 20 years ago, in-town residential and in-town living didn’t exist. It was last one out switched the lights off at night. Now you’ve got 24-hour leisure, bars, restaurants – a vast array of things going on.”

If Manchester can keep delivering what young professionals want and offer a practical alternative to London, that inward migration will underpin opportunity across every sector in local property.

‘People take the time to talk to you’

Julian Cotton, associate director, Cushman & Wakefield

Julian Cotton moved to Manchester from London with his wife and two-year-old child last September

Why did you move to Manchester?

Job relocation. I had worked at the Cushman & Wakefield London office for the previous four years, and Cushman & Wakefield was instructed to sell Far East Consortium’s Meadowside project in Manchester. Recognising what the market was doing in London, we felt it was a suitable opportunity to set up a new homes team in Manchester.

How does the quality of life compare?

I’ve been really pleasantly surprised. As a whole, Manchester and its surroundings are a fantastic place to live. I have a young family, so I live 10 miles outside the city centre, and probably don’t utilise Manchester as much as I should. Manchester has an awful lot of what London has to offer, albeit on a smaller scale: the social scene, the nightlife, theatres, restaurants.

There is a lot of green space on your doorstep, which you don’t really get in London. The Peak District, which is beautiful, is only 45 minutes away.

How do costs compare?

My expectation was that the cost of living would be cheaper up here than it actually is. There is a distinct difference in the cost of renting. You certainly get more for your money from Manchester. But the cost of living, day to day – food, groceries, transport, utilities – is not too dissimilar.

What challenges were there in moving out of London?

The biggest challenge was persuading my wife to move up. But she was actually fairly amenable. Obviously you’ve got the whole logistics issue of moving your life from London to Manchester. It’s always difficult when you’ve got mates and family on your doorstep, and you’re moving up to a location where you don’t know anyone.

My wife didn’t know anyone, so she has had to start again. But that’s helped by having a two-year-old child who’s in a different class every day so that means she has to go out and meet new people.

Would you recommend the move to others?

Absolutely. I love London, and I lived there for 12 years. In London you feel like there is such a buzz about the place, but everything is so hectic and manic, whereas in Manchester that’s not the case. People are on a different planet compared with those in London. They take the time to talk to you. From a professional standpoint, that has opened doors that don’t exist in London.

Main image: Chris Hepburn/Robertharding/REX/Shutterstock