Market snapshot

Office Market Pulse Newcastle Q3 2013

At 102,747 sq ft, Newcastle city centre recorded its highest quarterly take-up of office space in five years during Q3; this brings the total city centre office take-up for the year-to-date to 218,549 sq ft.

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In this issue:

Newcastle city centre office market sees highest quarterly take-up in five years

Standing at 102,747 sq ft - 80% higher than the same period last year - Newcastle city centre recorded its highest quarterly take-up of office space in five years during Q3. This brings the total city centre office take-up for the year-to-date to 218,549 sq ft. With several large deals expected to complete in Q4, including 35,000 sq ft to Barclays at East Quay 5, we expect the end-of-year total to exceed 300,000 sq ft.

Despite an exceptional first half, the out of town office market showed signs of a slowdown in Q3, with just 75,324 sq ft of office space let or sold – down 31% on the same period in 2012. However, the year-to-date total of 538,132 sq ft is still a significant achievement for a market characterised by sub-5,000 sq ft transactions.

For a detailed breakdown of Q3 2013 take-up by grade, please click here or on Chart 1 to the left of this article.

Significant North East office lettings Q3 2013

Property 

Size (sq ft)

Landlord / Vendor  Tenant / Purchaser 
Central Square South

23,600

Parabola PwC
Q15, Quorum Business Park

10,450

Quorum Syndicate Swiftpage International
St Nicholas Building

9,297

Danmerc National Audit Office
Bede House

9,898

Commercial Estates Group Ingeus
Wellbar Central

9,500

Siddiqui Family

Irwin Mitchell

Source: Lambert Smith Hampton

City centre on brink of grade A supply shortage

Total availability in the Newcastle city centre office market reduced by 8% in Q3, and now sits at just under 1.2m sq ft – three quarters of which is in the second hand market.

While Silverlink’s 35,000 sq ft development in the Stephenson Quarter and Newcastle Science City’s 38,000 sq ft ‘The Core’ development on the site of the former Scottish and Newcastle Brewery site will provide a much needed addition to grade A stock levels, the schemes are still some way off completion. With demand for grade A space improving, the city is showing worrying signs of supply shortage. 

Total out of town office supply in the North East region currently stands at 2.7 m sq ft, with Cobalt and Quorum business parks accounting for around 30% of this figure.  

For a breakdown of Q3 2013 office supply by grade, please click here or on Chart 2 to the left of this article.

City centre office rents on the rise as supply shortage begins to bite

Prime headline rents in the city centre have risen steadily throughout the year to their current level of £21.50 per sq ft, as grade A office space becomes increasingly difficult to source.

Prime headline rents for out-of-town grade A space remain unchanged at £16.50 per sq ft.

For a breakdown of Q3 2013 office rental values, please click here or on Chart 3 to the left of this article.

How did the national investment market perform in Q3 2013?

Despite London’s relative expense, quarterly investment increased to almost £5bn, which was more than double the amount transacted in the first quarter of the year.

Regional investment levels in Q3 are the highest they have been since Q1 2011. Total investment was £3.71bn, a 14% increase on the Q2 figure of £3.24bn. 

Overseas investors purchased £4.16bn of UK property in Q3: the highest total since Q2 2012. However, early indications are that UK investors are ready to play a larger part in the market, accounting for 55% of the quarterly investment total: a 15 point increase on the 2012 average. 

What does this mean for the market? Find out in UKIT Q3 2013.

Regions

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