Market snapshot

Newcastle Office Market Pulse Q3 2016

Despite the fall in city centre take-up during Q3 2016, activity across Newcastle’s wider office market remained slightly ahead of the five-year quarterly average, which was largely attributable to the stability of the out-of-town market.

Worryingly, Zerolight’s letting of the entire 14,920 sq ft at Live Works - the last of the city’s new developments – means that the supply of grade A space is now reaching a critical level.

We are hopeful that this will stimulate new development and we anticipate that the proposed construction of new space at Science Central – a joint venture between Legal & General and The City Council - will gather momentum alongside Marrico’s Strawberry Place site, which includes 100,000 sq ft of offices.

In the interim, the refurbished Central Square South will be available in Q4 2016 offering 50,000 sq ft of high quality space.  However, a letting of 7,000 sq ft has already been agreed and we anticipate that the remaining space will be taken-up equally as quickly.

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In this issue:

Newcastle’s last new city centre development is let

At 171,886 sq ft, take-up across the combined Newcastle city centre and out-of-town office markets remained slightly ahead of the five-year quarterly average during Q3 2016.

While this figure is down some 7% from the previous quarter and 36% from the same period in 2015, we are encouraged by how well the region’s occupier markets have withstood the post-Brexit backlash.

Take-up in the out-of-town market remained fairly consistent over the past four quarters, with Q3 2016 a fraction above the previous three months at 133,831 sq ft.

The city centre, which is severely constrained by an ever-decreasing supply of grade A space, transacted just 38,055 sq ft, which was bolstered by Zerolight’s letting of the entire 14,920 sq ft at Live Works - the last of the city’s new developments. 

Some larger requirements still remain unsatisfied and there are now very few options available in the city centre.


Key occupational transactions, Q3 2016


Property 

Size (sq ft) 

Landlord / Vendor

Tenant / Purchaser

The Live Works, Quayside 
14,920
Live Theatre
Zerolight
Camberwell House, Doxford International Business Park, Sunderland
20,557
Rockspring UK Value Greenridge (Jersey)
Paseq 
Salvus House, Aykley Heads, Durham 
32,561
Sunderland Marine Insurance
Durham City Council

Source: Lambert Smith Hampton 


Grade A city centre supply reaching critical levels

The supply of grade A space in the city centre is now reaching a critical level following the letting of The Live Works. Ne wgrade A space is now limited to The Jesmond, which extends to 11,000 sq ft and is located just outside the city centre. 

The main focus is now on the refurbishment of existing buildings and Central Square South will be available in Q4 2016 offering 50,000 sq ft of high quality space.  However, a letting of half of a floor extending to approximately 7,000 sq ft has already been agreed and we anticipate that the remaining 43,000 sq ft will be taken-up quickly.


Headline rents remain stable as incentives fall

Despite the pinch in grade A supply, headline rents in the city centre remain unchanged at £23.00 per sq ft.  

Out-of-town, Gleeds’ letting at Q11 Quorom Business Park secured a rent of £16.00 per sq ft. 

Incentives are decreasing and are now six to nine months rent free per five-year term of lease.

Post-Brexit blues for investment market

Investment market activity across the region has been relatively quiet through the ‘post-Brexit’ summer months, driven largely by local private investors.  The notable exception to this was the opportunistic acquisition by Squarestone of EDF’s principal UK call centre on the Doxford International Business Park in Sunderland for £11.1m, representing a 12.6% net initial yield.

Key investment transactions, Q3 2016


Property 

Value (£m) 

Yield (%) 

Investor

Vendor

Doxford International Business Park, Sunderland
11.1

12.6

Squarestone Growth LLP

Jadwa family

Aykley Heads Business Park, Durham
3
-
Durham County Council
Undisclosed 

Source: Lambert Smith Hampton

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0191 338 8306

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Neil Osborne
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0191 338 8306

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