Member Article

Strong level of Newcastle office space take-up could lead to shortage of supply

The Newcastle city centre and out-of-town office market has made a strong start to 2015, posting a combined take-up figure of 299,000 sq ft in Q1, substantially above the four year annual average of 189,000 sq ft for the same period.

Take up-comprised 48,000 sq ft within the city centre and 251,000 sq ft in the out of town market, with notable deals including the 17,000 sq ft letting to Connect Physical Health Centres at Quorum Business Park, North Tyneside, and 20,000 sq ft to iParadgms at Wellbar Centre, Gallowgate.

Of the 44 deals in Q1, the vast majority were in the out of town market, with only 14 deals in the city centre.

Chris Dent, of DTZ’s Office agency team in Newcastle, said: “The supply of new grade A space to the market is still one of the biggest challenges facing the city.

“Just two new office developments are currently on site - The Rocket at Stephenson Quarter and Liveworks, Quayside, which are 35,000 sq ft and 14,000 sq ft respectively.

“If the current levels of take-up continue, there will be a significant shortage of supply in the latter half of 2015.

“We have already seen the hardening of incentives and the lack of supply is also putting upward pressure on rents. This can already been seen with the last remaining suite at Wellbar Central increasing the quoting rent to £24.00 per sq ft.”

Ben Clarke, Head of UK Research at DTZ, said: “The increased speculative pipeline in regional UK office markets is good news for various key occupiers reaching lease events, but the total pipeline is still more than a third lower than completions during the pre-recession 2004-08 period.

“This strength in prime occupier markets is helping support investment demand, which eroded prime UK regional office yields by a further 20 basis points in Q1.”

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