Member Article

Office supply concerns continue

Office supply concerns continue

2014 has been one of the best of the last four years for the regional office sector with just under 800,000 sq ft let across out-of-town and Newcastle city centre markets says the Offices Group of agents which comprises BNP Paribas Real Estate, Bradley Hall, DTZ, Gavin Black & Partners, GVA, Knight Frank, Lambert Smith Hampton, Naylors Chartered Surveyors, Sanderson Weatherall and the ES-Group.

“The year has seen some notable lettings for the city centre with Ernst & Young’s 11,200 sq ft at City Gate, Penspen Integrity’s 8,000 sq. ft at Central Square and Global Radio’s 14,000 sq ft at Wellbar Central, Gallowgate being examples. Out of town lettings include 40,000 sq ft and 24,500 sq ft to Siemens and HP respectively at Cobalt Business Park and 26,000 sq ft to Cofely Workplace at Quorum. These are good lettings which emphasise the strength of the region as a location for business,” says Patrick Matheson, partner, office agency, Knight Frank.

“The market continues to be active with a total of 158 transactions over the year. The average city centre deal was slightly higher than previously at 4,375 sq. ft. whilst the average out of town deal at 5,388 sq. ft.” adds Mr. Matheson.

Chris Pearson, partner, Gavin Black & Partners, says the availability of Grade A office space in Newcastle city centre remains a concern. “There are just two city centre buildings on-site, the 14,000 sq ft Liveworks and The Rocket at Stephenson Quarter which will deliver 35,000 sq ft ready for occupation in July 2015. Given deals presently in the pipeline, the supply side will get tighter this year. This must inevitably drive rents upwards.”

This optimism is shared by Knight Frank in its latest Regional Office Market report which says the subdued rental growth over the last few years will change to “strong rental growth over the next 12 months with new development completions securing higher prime rental levels”. The diminishing availability of Grade A stock and lack of completions is driving this rental growth with, in the case of Newcastle, £25 per sq ft expected to be achieved this year. Vacancy rates are forecast to fall with a softening of incentives to potential tenants.

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