Strongest out-of-town take-up for three years
The out-of-town office market witnessed its strongest Q2 level for three years, with 42 deals totalling 200,379 sq ft completed in the three months to June. Notable transactions included the letting of 30,369 sq ft to Tommee Tippee at Balliol Business Park and the 36,993 sq ft sale to Hays Travel at Gilbridge House, Sunderland.
City centre take-up remains robust despite lack of supply
Tempered by the lack of supply, Newcastle city centre also continued to perform strongly during Q2, with 53,768 sq ft of office space let across 11 deals. Notable transactions included DWF and GVA’s acquisition of Central Square South at £23.50 per sq ft, cementing the headline rent set in Q4 2017, along with Mott Macdonald’s acquisition at Time Central. The largest deal to complete was Newcastle University’s 13,606 sq ft acquisition of Northumberland House, Princess Square.
Refurbishment schemes set to bolster grade A supply
Grade A office supply continues to dwindle across the city centre, accelerated by the high levels of activity during Q2. While there are a number of new developments in the pipeline, including the Luman at Newcastle Helix which is set deliver 108,000 sq ft of grade A accommodation, these are two-to-three years away from completion.
However, several high quality refurbishment schemes are currently underway, including 71 Grey Street and Jesmond Three Sixty, which will help increase availability in the interim with both buildings set to provide an additional 40,000 sq ft of grade A accommodation.
Michael Downey, Associate Director at LSH Newcastle, commented: “The limited availability of grade A space, combined with the increasing level of requirements across both the city centre and out-of-town markets has provided a clear opportunity for landlords to capitalise on bullish terms. As such, we anticipate prime city centre rents will likely surpass £24.00 per sq ft by the end of 2018, which will create an even stronger business case for the refurbishment of existing product in order to satisfy demand ahead of the delivery of Newcastle Helix.”
The NEOA comprises Lambert Smith Hampton, Cushman Wakefield, Bradley Hall, Gavin Black & Partners, Sanderson Weatherall, GVA, Knight Frank, Naylors, BNP Paribas and Dunlop Heywood.
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