Market snapshot

Office Market Pulse Newcastle Q3 2017

Occupier take-up across Newcastle’s city centre and out-of-town office markets improved during the third quarter of 2017, with 167,243 sq ft of space transacted across 56 deals. This represents a 29% increase on the previous three months, albeit some 19% less than the five-year quarterly average.

The out-of-town market, once again, led the way in terms of take-up, increasing by 15% on the previous quarter to reach 101,957 sq ft and accounting for 61% of the space transacted.

Notwithstanding the city’s resilience throughout the traditionally quiet summer months, annual take-up figures are expected to be largely in line with 2016, reflecting the continued dearth of grade A stock and lack of larger out-of-town deals. While Taras Properties Ltd is due to submit a planning application for 100,000 sq ft of grade A offices on the site adjacent to Pilgrim Street in the city centre, the scheme remains two-to-three years away from completion and so the situation is likely to remain unchanged throughout 2018.

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In this issue:

Average deal size falls below 3,000 sq ft

Occupier take-up across Newcastle’s city centre and out-of-town office markets improved during the third quarter of 2017, with 167,243 sq ft of space transacted across 56 deals. This represents a 29% increase on the previous three months, albeit some 19% less than the five-year quarterly average.

The out-of-town market, once again, led the way in terms of take-up, increasing by 15% on the previous quarter to reach 101,957 sq ft and accounting for 61% of the space transacted.

Despite these resilient take-up figures - bolstered by Trinity Mirror Group’s relocation from Thomson House to Eldon Court - the average deal size was just 2,745 sq ft, reflecting the continuing churn within the SME sector.

Key occupational transactions, Q3 2017


Property 

Size (sq ft) 

Landlord(s)/vendor

Tenant/purchaser

2nd Floor, Eldon Court
22,228
Intu
Trinity Mirror Group
3rd Floor, Cobalt 9B
13,030
Undisclosed 
Siemens 
1st Floor, Quayside House
6,950
Northumberland Estates
NRFB LLP

Source: Lambert Smith Hampton

City centre grade A supply dwindles even further

The city centre’s supply of grade A space has continued to tighten following the lettings to NRFB, Epic Gaming and Ubisoft, to just 134,601 sq ft. With knowledge of further grade A space currently under offer, we could see supply dwindle towards 120,000 sq ft by the turn of the year.

Taras Properties Ltd is due to submit a planning application for 100,000 sq ft of grade A offices on the site adjacent to Pilgrim Street in Newcastle city centre, albeit the scheme remains two-to-three years away from completion.                

City centre headline rents set to rise in Q4 2017

Headline rents in the city centre are currently £23.00 per sq ft, set in Q2 2016. However, a new headline rent should be set in Q4 2017.

Incentives remain at 9 – 12 months’ rent free for a five-year term.


Newcastle office investment volumes up by a third

Boosted by Aviva Investors sale of Keel Road House in Sandgate for £9m, the volume of office investment transactions across Newcastle rose to £14.2m in Q3 2017 - up by a third on the five-year quarterly average.

The barrier to further deals taking place in the final quarter of 2017 is likely to be due to a lack of stock rather than any dampening of demand.

Key investment transactions, Q3 2017


Property 

Value (£m) 

Yield (%) 

Purchaser

Vendor

Keel Row House, Sandgate 
9.0 5.57 Undisclosed 
Aviva Investors
All Saints Businsess Centre 
4.0 8.6 Maya Capital LLP
Undisclosed 
Gunner House, Neville Street
2.3 6.65 East Eye Jomast

Source: Lambert Smith Hampton

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Michael Downey
Surveyor - Capital Markets

0191 338 8326

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Michael Downey
Senior Surveyor - Office Advisory BSc (Hons) MRICS

0191 338 8326

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