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Newcastle offices

NEWCASTLE OFFICES

Supply of Grade A office space will get a boost as two buildings are due for completion shortly. This is on the back of improving investment market sentiment which reached £76m in the first half of this year reports Patrick Matheson, partner, office agency, Knight Frank.

The two schemes completing shortly are the 35,000 sq ft ‘The Rocket’, Stephenson Quarter and the 14,000 sq ft ‘Live Works’ building, Quayside.

“This could spark another round of activity in the second half of the year as competition for new office premises in the city centre strengthens. However there is a slight concern that once these schemes complete, they will be no new office developments under construction in the City Centre which could put significant pressure on future prime office rents.

“City centre take-up in reached 100,000 sq ft made up of firms from diverse backgrounds, all actively looking to expand or relocate to the city centre. The opportunity to occupy space at a regional city remains to be a significant factor for potential occupiers, and it is likely that Newcastle will continue to attract organisations from different industries for the remainder of the year,” says Mr. Matheson

“Of 33 City Centre deals completed in H1 2015, the largest leasing deal was Iparadigms taking 19,904 sq ft at Wellbar Central. Activity was particularly strong on Grey Street, with a surge of interest bringing the famous street back into demand. Lettings here included Gardiner & Theobald, Adecco and Office Angels.

“The positive trend in the out-of-town market continued, with 374,810 sq ft transacted, a 12% increase on the same period in 2014. The only new speculative development which will be delivered on Tyneside outside Newcastle City Centre this year is The Jesmond which will deliver 11,000 sq ft of Grade A space adjacent to the West Jesmond Metro.”

Investment

“In the investment market, volumes were more than double the number of transactions in the first half of 2014. Prime office yields have remained unchanged at 6.00% for the last 18 months, offering higher returns than other regional cities such as Manchester and Leeds,” says Dickon Wood, partner, investment, Knight Frank.

“One of the deals involved Knight Frank’s sale of Nexus House on behalf of Greenridge, which offered just over 11 years of undoubted government income. Kames Property Income acquired this asset for £7.73m, just over its asking price of £7.45m, reflecting a net initial yield of 6.75%.

“Another key deal in the city centre saw the purchase of St Nicholas Buildings by a private investor, which was understood to have met the asking price of £13m, reflecting a net initial yield of 8.50%. The asset was multi-let, with a weighted average unexpired lease term of approximately two years,” adds Dickon Wood.

“In the out-of-town market, activity was largely driven by overseas investors. The rising international attention provides evidence that Newcastle is now becoming an attractive hot-spot for keen investors looking to capitalise on strong returns from office schemes beyond London.”

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