Manchester’s office market is gaining momentum, fueled not only by global companies but increasingly by homegrown AI companies. As borrowing costs are expected to drop and investment accelerates, AI is set to become the key driver behind the city’s upcoming office space boom, transforming demand patterns and creating new opportunities for landlords and investors.

Where does the Manchester office market stand today?

In the first quarter of 2025, Manchester’s lettings increased by 79% year-over-year and were 40% above the five-year average. The Grade A vacancy rate has tightened to just 3.3%, and prime rents have reached £45 per square foot. Landmark deals like ARM’s 68,860 sq ft pre-let at St Michael’s and BNY Mellon’s 200,000 sq ft at 4 Angel Square (the biggest UK regional office deal since 2020) have driven these figures. But while global giants grab the headlines, the next wave of demand is quietly building, powered by Manchester’s AI scene.

Why is AI becoming Manchester’s secret weapon?

Manchester has emerged as the UK’s AI capital. It topped the 2025 SAS “AI Cities Index” for the second year in a row. AI firms headquartered here raised £290 million in 2024 alone, and sector
valuations have grown fivefold since 2020 to £3.2 billion. With the £1.7 billion innovation district now delivering lab and flex-office space across the former North Campus, the city is becoming the UK’s hotbed for AI. As the capital flows in, these AI firms will scale fast, bringing more employees and larger office footprints with them.

What will trigger the next demand surge?

Falling interest rates. The Bank of England paused at 4.25% in June but is widely expected to cut rates to 3.75% by year-end, and possibly to 3% in 2026.
That shift will accelerate three key things:
➢ Cheaper VC money will turbocharge hiring as the workforce requires evolution with upskilling to adapt to new emerging roles.
➢ More speculative refurbishments will become viable.
➢ Landlords will be more willing to invest in high-spec tech spaces.

What role does Manchester’s innovation ecosystem play?

Manchester’s office market isn’t just about space; it’s about an ecosystem. The proximity to universities, innovation districts, and collaborative tech hubs is a real pull for AI firms. This cluster improves talent attraction, partnership opportunities, and access to cutting-edge research, all of which feed demand for nearby office and lab space. Manchester’s integrated approach is turning office leases into strategic moves for tech growth, not just property deals.

What’s happening in the middle-market?

AI is already reshaping demand under 20,000 sq ft. New co-working spaces from Colony and Department have opened, targeting AI startups. But landlords with ESG-compliant floors in the 10-15k sq ft range will also benefit, offering grow-on space for firms graduating from shared workspaces.

What does this all mean?

The global occupiers are here to stay, but Manchester’s next office cycle will be driven by local AI scale-ups, not legacy banks. We can expect tomorrow’s unicorns in Ancoats and MediaCity to define the 2026–27 office market