Columnist

A new year and a new outlook for property scene

Property activity in the North East during 2025 was rather slow. 

The economy was volatile, reacting to global factors of war, energy, weather, tariffs and the Government seeking to reverse austerity and find growth.

The one sector that stood out for activity was investment in long-term, stable income-producing properties. 

The economic year ahead is looking rosier, with a forecast of falling interest rates, but with a caution that increased costs will challenge development viability.

Rapid technology development is being led by artificial intelligence adoption and the construction of key data centre projects that include QTS’ £10 billion base in Cambois, near Blyth.

The full build-out of up to ten facilities is expected to take around a decade, completing by 2035.

The Latos AI-Ready Data Hub, at Preston Farm, near Stockton-on-Tees, represents a £100 million investment and is expected to be operational by 2027.

The North East Combined Authority (NECA) has announced support through its local growth plan and digital growth and innovation strategy, focusing on skills, connectivity and investment to underpin projects like hyperscale and artificial intelligence-ready data centres. 

NECA’s commitments include funding for digital infrastructure, transport decarbonisation packages and collaborations with global partners such as Hitachi and Port of Tyne, to ensure the region is ready to host and benefit from large-scale digital centres.

The rapid artificial intelligence adoption is an important demand driver with developers expected to introduce more digital infrastructure for potential operational efficiencies for occupiers. 

This, linked with improved sustainable plant and machinery in buildings, will reduce occupation costs.

The demand driver from occupiers has switched from the out-of-town, easy car accessibility of business parks to focus on the needs of people. 

The attraction and retention of key staff is driving demand to locations for quality work, including higher sustainability standards, space and lifestyle. 

The relocation of HMRC from Longbenton to Newcastle city centre is a good example. 

The latter will significantly increase the economic activity and property demand in the city centre.

Over time, a gap has developed between investment values for ‘green’ buildings that sell at a premium to reflect their greater efficiency compared to the non-compliant buildings often sold at a discount in comparison. 

As a result, retrofitting will become essential in protecting and enhancing the value of the property asset.

The uncertainty in the economy has brought a seismic shift in manufacturing needs, with supply chains delivering from ‘just-in-time’ to ‘just-in-case’, resulting in more demand for local logistics.

Recent legislation has focused on housing affordability, intervention taxes, rent control and planning with drivers for net-zero, wellbeing and opportunity creation. 

We are likely to see more coming through during the next year. 

But the public sector cannot achieve this step-change alone. It needs the private sector to invest. 

The housing market is challenging, with affordability slowing demand for first-time buyers and so on up the chain.  

We saw during 2024 a fallback from investors in commercial property being prepared to take some speculative risk to a more cautious approach in 2025 of investing solely in bespoke pre-let development schemes.

We need to encourage the investor to have greater confidence to risk speculative development schemes that will quickly provide accommodation for occupiers as the pace of the economy grows and to attract inward investors and demand from occupiers as leases come to expire.

This requires the Government, combined authorities and local councils to provide clarity of purpose and give investors confidence that consents will be delivered quickly. 

This means taking the opportunity to incorporate social values for place, such as the much-needed hard infrastructure of transport and site services, together with the soft infrastructure of education, health and culture to support development schemes that have well-designed quality open space and public realm kept well maintained to enhance and protect long-term values.

Kevan Carrick is co-founder and owner of JK Property Consultants LLP. He is a member of the RICS Land & Natural Resources Professional Group Panel that consulted on the National Planning Policy Framework, and is chair of the North East Business and Innovation Centre (BIC)

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