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1:00 am, June 9, 2008
Rental target raises eyebrows

A bit steep. That seems to be the verdict on Peel Holdings' intention to secure headline rentals of £30 per sq ft at Media City.

This is only a third of what national broadcasters are paying in central London, but in the local context it hardly seems like a bargain.

No reasonable person wants to see Media City fail and it has to be acknowledged that achieving high rents is a key measure of success.

But it is hard to see how media companies already based in the Greater Manchester area — even those which are part of national or international groups — could justify paying rents higher than those in Spinningfields.

For evidence to support this assertion, we call Alex Connock of Ten Alps, the AIM-listed independent television producer, who describes the kind of premises he has operated from over the years: “We opened up in someone else's photocopier room for zero rent, then went to a room next door to a dental surgery for something equivalent to a sausage roll and a packet of Hobnobs per day.  

“Our first proper office was a room above a betting shop, with a Portaloo right outside the front door, which meant the corporate photo opportunities always had raffish geezers coming out of the toilet in the foreground, some of them crack pipes in hand.

“Then we went to a converted false teeth factory, which we still actually have.  At no point in the early years did we pay anything approaching £30 per sq ft.”

As you may glean from this, many media businesses are not exactly blue chip tenants. Outside the really big players, they do not seek to make statements with the property they occupy and tend to slide into whatever secondary space fits their budgets. Peel is adamant that smaller media businesses will not be priced out and points out that it has already delivered cheaper space at the Pie Factory. Fair enough.

But the jury is still out on whether, even with the presence of the BBC to draw other tenants in, Media City can generate sufficient demand to achieve double the current going rate for the Salford Quays office market. If it can't, Peel stands a real chance of creating a brilliant opportunity — for other developers offering much cheaper space nearby.

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The Manchester Independent Economic Review revealed its baseline assessment last week and concluded, to nobody's surprise, that financial services is the city region's biggest single sector.

It accounts for 21.2 per cent of gross value added and increased employment by 33 per cent between 1998 and 2006, during which time manufacturing employment shrank by 31 per cent. Even so, manufacturing is still the second most important sector in GVA terms, accounting for more than twice as much as any other sector apart from life sciences. We hope this reality will be fully reflected in MIER's conclusions.