Partner Article

Underlying trends are positive for the office sector

With 2013 ending with the 1m sq ft take-up barrier being exceeded there is expectancy in the air that this level of activity will continue says Patrick Matheson, partner, office agency, Knight Frank.

In part it has with a number of deals during this year’s first quarter totalling nearly 170,000 sq ft across 36 deals showing that there is continuing activity in the market place. If we are in another year where take-up will exceed 1m sq ft there are challenges ahead, not the least of which is the supply of new stock, particularly in Newcastle City Centre.

During recent years there has been a reluctance by developers to start on site because of uncertainty in the economy, and the cautiousness of funds to support development without pre-lets, inevitably there is a vacuum where demand has limited choice.

In Newcastle’s city centre there is just 110,000 sq ft of Grade A space available including 40,000sqft at the flagship Wellbar Central and good quality refurbished space is in short supply. There is just one city centre scheme ‘on site’ which is Silverlink’s Stephenson Quarter scheme. This will bring forward the stunning “ Rocket “ extending to 35,000 sq ft and completing in summer 2015.

The Pearl refurbishment is the other new arrival and here 38,000 sq ft is available in a central location. Otherwise city centre choice is restricted.

Out-of-town activity continues to be focused in the main on the two landmark schemes at Quorum and Cobalt but, as the take-up in the first quarter of this year shows, ‘out-of-town’ covers a great many locations such as Team Valley and Newburn Riverside where various office transactions have been taking place in Q1.

There is a real sense of confidence in the market and we know that developers are in talks with planners on developments that have been on the shelf during the recession in order to bring them forward now but this will still mean that there will no new office product other than “ The Rocket “ being available before 2016 in the City Centre . Out of town there is still best in class product available to meet the demand of an improved inward investment market .

The confidence , feel good factor & improved economy must lead to higher rents to facilitate and stimulate new developments. We need new flagship offices and the reality is that even with higher rents that stimulate development the cost of property to an occupier is only around 5% ! People & IT are some of the high costs. We are looking forward to seeing more cranes than ever on our skyline delivering world class office developmert.

This was posted in Bdaily's Members' News section by Knight Frank .