THE regional office sector has seen the lowest level of take-up for a quarter for two years in Newcastle city centre with just five deals over the three-month, fourth quarter, period at an average of only 2,500 sq ft.
The total city centre take-up for the year at 154,177 sq ft was a 20% reduction on 2011 though out-of-town letting activity at 578,087 sq ft was marginally higher than 2011.
Chris Pearson, offices partner at Gavin Black & Partners, says that the figures for city centre take-up are clearly low “but taking everything into account – the recession, occupier uncertainty, city centre under supply and out-of-town over supply, it wasn’t surprising”.
“The low average size of office lettings in the city centre is a continuation of the trend for smaller lettings driven by activity across the board from small and medium- sized businesses that can make local decisions. There is clearly economic activity in the size-band of up to around 5,000 sq ft which is encouraging.”
Aidan Baker, offices director at BNP Paribas Real Estate, says it is clearly a good time to seek office space.
“For occupiers there is a good spread of incentives ranging from significant rent-free periods to lower rents to shorter, more flexible, leases and so on. This is especially noticeable in demand for quality refurbished space to serviced office accommodation.
“However the city centre has seen a recent letting at a headline of £21.50 per sq ft so while rents are under pressure the lack of supply of new, Grade A, space is acting as a balancing effect – with a shortage of Grade A supply means headline rents are relatively stable and incentives are likely to decrease as further space is acquired.
“The city centre development pipeline is almost without product with the exception of Silverlink’s start on site at its Stephenson Quarter scheme that will bring forward an initial 35,000 sq ft of Grade A space. That is the only start on site in 2013 in Newcastle city centre with regards to new space.
“While there have been just five city centre deals in the last quarter of 2012 with just over 13,000 sq ft let, there is room for confidence that the trend for smaller lettings will continue and that correctly priced space will let to local businesses or national businesses seeking good space at competitive overall occupational costs.”
The research is based on combined feedback from the leading office agents namely BNP Paribas Real Estate, DTZ, Gavin Black & Partners, GVA, Jones Lang LaSalle, Knight Frank, Lambert Smith Hampton, Naylors Chartered Surveyors, Sanderson Weatherall and Storeys Edward Symmons.