Partner Article

Confidence is on the up for the North East propery market

January 2014 dawns with a great deal more optimism in the minds of property folk than in any New Year since 2007 when the Land Registry recorded that house prices in the North East had been increasing at nearly 2% per month in the last quarter of 2006. Seven years on and an awful lot of pain later, it was becoming clear at the end of last year that at last prices were on the up and I anticipate that this will continue in the coming year. A steady sustainable increase in housing values is always good news for business and the commercial property sector generally, because it’s such a powerful barometer of overall confidence. For commercial property, a better housing market always rub off positively.

That said, the commercial markets are still in a difficult position and we predict that the year ahead will be one of further consolidation. This is due to the fact that although there is increased demand for commercial space, with values having fallen back significantly since 2008 in many locations and asset classes, most new development remains unviable given that building costs continue to increase year on year.

However, on a positive note 2014 will certainly see the first new speculative industrial development in the core Tyne & Wear area since 2008. With the industrial market generally being short on supply and with unfulfilled demand this will be the first sector to show a recovery and Naylors is already working hard to bring a number of projects forward for Ravensworth Developments, Hellens Group, UK Land Estates and The Northumberland Estates. Rental values always depend upon size and specification but should exceed £6 per sq ft for good quality new space of 5,000 sq ft and above.

The market for City Centre offices will also further it’s recovery in 2014 although it will remain a tenant’s market with plenty of good space available at excellent rental rates from £10 per sq ft upwards. Brand new space is already in very short supply and with the first phase of Stephenson Quarter the only new accommodation currently being built, but with completion not due until 2015, no new offices will hit the market this year. Out of town, the market remains difficult but it’s not all bad news. Our clients UK Land Estates, for example, had a good year in 2013 at Newburn Riverside with around 35,000 sq ft having been taken up following refurbishments and there is still space available. Although the rental picture on the region’s business parks will remain much as it has been for the last few years, with a significant oversupply continuing to impact on demand and rental levels, there is always interest in those buildings where a good level of investment has been maintained, notwithstanding that in some areas values have shown little movement for a number of years.

But despite some problem areas, optimism remains and the property market has to be seen in a wider general business context. For example, whilst some parts of the office property market have suffered from oversupply, overall occupancy levels have held up pretty well particularly when the improvements in computer capabilities are taken into account. The growth in electronic filing, a trend which still has some way to go yet, means that the existing office stock is now capable of employing more people than was previously considered possible. If that had not been the case then the uptake of space which is improving would have been greater and the fact that the market is surviving this change is encouraging. Similarly, the warehousing and distribution parts of the industrial sector have shown growth due to burgeoning internet sales, a trend that is also bound to continue.

So all in all, we look forward to 2014 as a continuation of the work in progress set away last year – the road ahead is definitely brighter. Bill Naylor is Director at Naylors Chartered Surveyors

This was posted in Bdaily's Members' News section by Rebecca Taylor PR .