Real estate: The foundations of the Manchester market

It may not have been officially recognised as the UK’s second city but in the past few years Manchester has consolidated its position as the next biggest market for law firms outside of London. And with large-scale development taking place across the city it is easy to see why the biggest firms in Manchester all have strong foundations in the real estate sector.

Despite a flood of recent new entrants, including real estate heavyweights Berwin Leighton Paisner (BLP) and Nabarro, the market is still dominated by four firms: Addleshaw Goddard, DLA Piper, Eversheds, and Pinsent Masons.

The top tier

The quartet all have longstanding links to Manchester and Eversheds Manchester senior partner Michael Clavell-Bate thinks it will be difficult for smaller players and new entrants to catch up with the top four firms due to their history in the city.

“When I started the top tier firms without question were Addleshaw Sons & Latham (now Addleshaw Goddard), Alexander Tatham & Co (now Eversheds) and Alsop Wilkinson (now DLA),” says Clavell-Bate. “So the top three firms in 30 years haven’t changed.

“My own view is there’s clear water between the top tier and between tiers two and three. The gap isn’t narrowing, it’s extending, and the reason I think for that is partly around complexity, partly around regulation, and partly around international coverage.”

Clavell-Bate adds that this international coverage is something that is becoming more important to Eversheds’ Manchester based clients. These clients include companies such as Morrisons, New Look, AstraZeneca, and fashion retailer Super Group.

“Our world is becoming increasingly complex almost year-on-year, so it’s not getting easier, it’s getting more difficult to deliver for clients,” says Clavell-Bate. “Clients often need a Manchester presence but you have to be delivering in Hong Kong, Shanghai, Paris or wherever it is they need legal services.”

Clients

The four firms are some of the few that offer their clients a full-service offering in Manchester and because of this are best-placed to cash in on the development taking place in the region as part of the Government’s Northern Powerhouse scheme.

Much of this work surrounds the redevelopment of properties in Manchester city centre, making clients such as development companies the Peel Group and Bruntwood extremely valuable. Both of these developers are highly active in the North West with Peel alone claiming to have been involved in £5bn of investment in the North of England.

In March Addleshaws advised Peel on its joint venture with Legal & General Capital to acquire MediaCityUK. Corporate partner Michael Birchall led the team, which included corporate partner Andy Green and real estate partner Stephen Kinsey. The team also included banking partner Martin O’Shea, construction partner Nancy McGuire and tax partner Justine Delroy.

Increasing transport links is also at the heart of the Northern Powerhouse plans as the Government plans to improve both connectivity between UK cities as well as attempting to attract foreign visitors to the region. As part of these plans Manchester Airports Group entered into a joint venture with the Beijing Construction Engineering Group (BCEG) to develop the £800m Airport City Project.

The 5m sq ft of developments that make up Airport City will include a mix of offices, hotels, advanced manufacturing plants, transport links and warehouses. Eversheds began advising Manchester Airport Group on the project in 2013 with a team led by commercial partner Kuljeet Gill. The team included partners Phillip Tunney, Ronald Patterson and Nigel Proctor. Proctor moved to DLA in August last year.

On the other side of the deal Addleshaws and BLP advised BCEG. Addleshaws’ team included national head of infrastructure, projects and energy Michael O’Conner while BLP’s team was led by funds partner Simon Pollock and real estate partner Damian Fleming.

DLA Piper

DLA has a strong presence in the North West but suffered the loss of four partners to Irwin Mitchell in 2012. The team included DLA’s Manchester property head Anita Weightman and former local managing partner Roy Beckett.

That team has not yet been replaced, and as a result DLA is arguably still underweight in real estate in Manchester – although it has picked up a construction team from Eversheds including Proctor and partners David Moss and Paul Giles.

“Our focus is on two things,” says DLA North West head of real estate Mark Beardwood. “First it is on operating a profitable real estate practice, and its a lot more profitable now, and second we’re focusing on a North West practice.”

“Last financial year real estate was our biggest practice group in the North West for DLA Piper so anybody who suggests that we are not focused on real estate would be wrong,” he adds. 

Partners at rival firms say they do not come up against DLA as much as some of their other competitors when it comes to local work.

DLA also pitches its local real estate team as a wider, North West group rather than a purely Manchester focused practice. Despite being based in Liverpool the firm’s North West head of real estate Mark Beardwood is still regarded as one of the big players in the local market.

DLA’s work includes advising Transport for Manchester (TfM) on the £205m extension of the Metrolink tram system through the to the Trafford Centre. DLA partner Robert Arnison acted for TfM while Eversheds principal associate Roy Barry acted for the landowner Peel Group. Outside of Manchester the DLA team also advise Cheshire West and Chester Borough Council on the £300m Northgate regeneration development in Chester.

Breaking into Manchester

With Manchester’s four major firms providing a full-service offering, new entrants to the market are required to find a niche before they can compete. This is the tactic Nabarro took when it launched its boutique real estate and corporate practice in 2014.

“There are a number of firms in Manchester and a number of new firms establishing in Manchester, so you need to be able to differentiate yourself,” says Nabarro’s Manchester office head Mark Haywood. “We feel that our differentiation is around our brand and our specialisation. Manchester has an established full-service magic circle, if you like, and they are very good at what they do.”

Haywood adds that by allowing the office to specialise in real estate and corporate work the firm provides an “alternative to the inward flows of capital from UK institutions” as well as sovereign wealth funds from abroad.

The firm’s approach has allowed Nabarro to win high-profile work such as advising longstanding client Hermes Real Estate on a joint venture with the Co-operative Group. Real estate partner Simon Staite led Nabarro’s team on the £800m NOMA scheme in Manchester city centre.

Since opening in Manchester Nabarro’s team has acted on transactions and developments worth over £1bn but in order to continue to grow it is still targeting those firms in the city with a full service offering. When the office launched in 2014 Haywood joined Nabarro from Addleshaws along with real estate partners Nathan Jensen and Monica Brij. Since then Nabarro has added to its ranks by picking up Eversheds real estate partner Peter Winnard in January.

Due to its small, focused offering Nabarro has managed to attract big names in the local market that are wishing to lead their own teams. In January the firm launched a corporate real estate offering in Manchester after hiring Pinsents partner Howard Gill

Chris Hallam also left Pinsents to join Nabarro as Manchester head of infrastructure, construction and energy in March. In the past Hallam has worked on the redevelopment of Wembley Stadium, the £3.8bn Greater Manchester Waste Management Project, and development of London’s Crossrail.

Future threats

Although the incumbents say that Nabarro has made a solid start in Manchester, they are arguably more concerned about the future plans of international players for the city.

Both Freshfields Bruckhaus Deringer and Latham & Watkins have recently launched low-cost shared services centres in Manchester. They currently have no plans to expand into a full-service offering, but firms are watching closely to see what will happen in the future.

“Whether Freshfields’ strategy changes down the line remains to be seen,” says Clavell-Bate, “but they are of course a global firm. Latham & Watkins and Berwin Leighton Paisner are also here and if these firms decide to go full service then there will be some serious competition for the top-tier firms.”