The Resi Boom Is Over, Long Live Manchester Offices?

It took just 11 months for the latest plan for Manchester's Great Northern Goods Warehouse to be altered.

Trilogy, the owners of the 6-acre Great Northern site at Deansgate, have decided to ride Manchester's tech wave by replacing 142 apartments with 146K SF of hipster-friendly office space in their historic warehouse conversion.

Will other resi developers junk their plans and tack toward offices, or is this a unique problem caused by a uniquely troubled site?

It feels like yesterday, and it almost was, that Trilogy unveiled their tree-themed public-realm-friendly £300M residential redevelopment plan for Manchester's troubled Great Northern Goods Warehouse.

Eleven months later, those plans are as relevant as yesterday's chip paper.

A new strategic development plan for the site, which goes before Manchester City Council's ruling Executive on 12 December, proclaims that it supplements the 2017 framework, rather than replacing it. But that conclusion is hard to sustain when the centrepiece (the 370K SF historic warehouse itself) is due an entirely different fate.

The three upper floors of the warehouse which were to be residential will now be devoted to office use to meet what a report to councillors calls "a shortage of high-quality Grade A office space" in the tech, digital and media sectors.

The decision once again throws into doubt the future of the prominent city centre site.

In January 2018 Tobermoray S.a.r.l., the vehicle of Robert Wolstenholme’s Trilogy and Hong Kong-based owners Peterson Group, revealed their answer to the Great Northern conundrum after a four-year rethink since the site’s acquisition in 2013.

During summer they worked on plans for residential towers on the rear part of the site.

The site has been languishing since a retail and leisure conversion in 2002. This ill-fated scheme was itself the consequence of nearly two decades of planning disputes, legal threats and inaction as a series of owners explored, then abandoned, the project.

The latest proposal has some significant advantages of Trilogy. The principal benefit is that expensive and intrusive construction work to create light wells in the Grade II listed warehouse will not be needed to such an extent.

Trilogy also gets to takes advantage of a city centre office market racing toward 1.5M SF of office take-up in 2018.

The growth has been lead by the tech, media and digital sector including Amazon’s well-trailed decision to team up with WeWork to take 90K SF at Hermes’ Hanover Building. The city's tech economy is valued at £3.2B and growing fast, presenting massive opportunities to the property sector.

More tech and creative firms are to come: WPP and Hewlett Packard are among the companies coming to gobble Manchester floorspace. Meanwhile e-commerce operators like Booking.com and The Hut Group are consuming ever-increasing volumes of city office property.

CERT Property director Howard Lord told the Bisnow State of Manchester offices event in November that other residential developers with historic buildings would be reconsidering residential.

Lord said the Northern Quarter has to rise to the challenge of meeting growing demand from office as well as residential development. “It’s difficult because the historic buildings are often smaller, but I think we’ll find that residential development has peaked in Manchester and we may start to see some residential schemes in the Northern Quarter being redesignated for mixed-use. So we will see more offices in the area, and I don’t think the office market has peaked at all. Manchester has a long way to go and we will find that take-up of 1M SF a year is the new normal.”

Trilogy also strengthens its hand as it steps away from a city centre residential market which is widely believed to be overheating.

Residential developers are already talking about a price correction.

Capital & Centric founder Tim Heatley, speaking at a Bisnow Manchester event in September, suggested market pressures could lead some developers to suffer. He said the market is already correcting the pricing of Manchester apartments, and this will deter 'buy-to-leave' investors.

"Because of the way developers are forced to fund projects, it often means forward selling to investors prior to construction," he said. "As a result you end up with so much of it focusing on being sold to investors who plan to rent it out. That’s great, we need lots of it, we’ll need more of it — but the market will probably peak. There will be a couple of years when there is too much kit, and that's not a bad thing because it will bring values down."

The latest planning report on Great Northern reveals that a new planning application is expected in 2019 to incorporate the new office plans. In the meantime a very modest residential first phase is planned.

"The partial implementation of public realm enhancements and delivery of 12 residential dwellings along Deansgate Terrace will form the first phase of development within the Great Northern Warehouse. These works are due to come forward in 2019," the report said.