Market snapshot

Office Market Pulse Newcastle Q4 2017

Despite occupier activity tapering off in the final quarter of 2017, a new city centre headline rent and improved enquiry levels in the run up to the year-end have created strong momentum for the Newcastle office market leading into 2018.

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In this issue:

Strong momentum heading into 2018

Combined take-up across the city centre and out-of-town reached 124,527 sq ft in Q4 2017; some 35% down on the same period in 2016.  Albeit, there were a number of transactions in solicitor’s hands that had aimed to conclude in December which carried over into January. Consequently, Q1 2018 is expected rebound significantly in both the city centre and out-of-town respectively. 

Total annual take-up figures for 2017 did fall below the five year average in both the city centre and out-of-town market at 178,000 sq ft and a 453,000 sq ft respectively, however there is an expectation that 2018 will return to normality. 

Notable transactions included HSBC’s acquisition of 4,562 sq ft at Central Square South, Frank Recruitment Group’s 3,300 sq ft letting at St Nicholas Building and Condeco’s 5,000 sq ft letting at Gainsborough House.

Lack of grade A supply tempers take-up figures

There continues to be a clear dearth of grade A supply across Newcastle city centre, with approximately 122,000 sq ft of grade A accommodation available.  This diminishing availability has continued to temper take-up figures somewhat.

New city centre headline rent

Prime and secondary rents continued to grow, with a new city centre headline rent set at £23.50 per sq ft at Central Square South.

Indeed, we anticipate that another new city centre headline rent will be set in 2018 at £24.00 per sq ft as supply continues to tighten. Although, prime headline rents for the out-of-town market are likely to stay the same at £16.50 per sq ft, as supply remains plentiful. 

Lack of availability hampers investment activity

The last three months of 2017 saw a lack of activity in the office investment market, with modest availability and only one transaction of any note completing; namely the sale of Kings Court, North Shields in the sum of £2.3m.

Other buildings brought to the market, such as Gateway West, Newburn with a price tag of £6.37m (9.5% NIY), are so far yet to exchange. 

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Michael Downey
Surveyor - Capital Markets

0191 338 8326

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Michael Downey
Associate Director - Office Advisory BSc (Hons) MRICS

0191 338 8326

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