Outlook

■ The devolution agenda, which will give a directly elected mayor powers over transport, housing and planning, will help instigate development. The reforms include the £300m Greater Manchester Housing Investment Fund which is expected to deliver between 10,000 and 15,000 new homes over the next 10 years.

■ Plans for the second leg of HS2, joining the West Midlands to the north of England by 2032-33, will act as a catalyst for further regeneration, particularly around Manchester Piccadilly station which will be expanded on the north side to accommodate the new line.

■ In the medium term, there is plenty of scope for Manchester’s real estate market to play catch up. The rise of London house prices has seen the gap between the capital and other regional cities widen to its greatest level in decades.

■ In Manchester, average house prices are less than a quarter of the London average. Homes are also more affordable at seven times average earnings, compared with London where homes cost 16 times the average wage.

■ This difference in house prices is reflected in the cost of residential land. While the cost of land in central London is now well above peak levels, brownfield sites in Manchester remain 60% below peak. Such a gap could work in Manchester’s favour, attracting investors and developers who seek to expand into more affordable markets.

■ However, the rising demand for more homes is unlikely to be fully met by the pipeline of new homes. Years of undersupply have left the city not only with a current annual shortfall of 5,100 but also a mounting backlog which has grown to almost 40,000 homes.

■ Given these supply constraints, we expect house price growth in the city to outperform the North West regional average which we forecast will grow by 13.7% in the five years to 2020.

■ The city also scores very well on affordability of staff and commercial property. We expect this to stimulate continuing demand for office space from both indigenous, northshoring, and inward-investing businesses.

■ We expect that prime office rents will reach £37/sq ft by 2019, and secondary rents will rise to £28/sq ft over the same period. While this is good news for landlords and developers, it will present a challenge to local businesses of all sizes.

■ In particular, we believe that there will be a shortage of mid-priced refurbished office space aimed at the TMT and SME sectors, and this gap in the market is not likely to be filled by the major national developers. This potential undersupply could be further intensified by a rush of office to residential conversions outside the city centre.

■ Balancing the needs of residents and businesses could well become one of the biggest planning challenges for Manchester over the next five years. Failure to meet demand for both housing and employment space is one of the biggest threats to the city’s growth.