The dwindling supply of office space in the heart of Newcastle is continuing to worry property agents, a survey has shown.
The Offices Group of agents, which comprises BNP Paribas Real Estate, Bradley Hall, DTZ, Gavin Black & Partners, GVA, Knight Frank, Lambert Smith Hampton, Naylors Chartered Surveyors, Sanderson Weatherall and the ES-Group, has carried out a final review of 2014, noting the year was one of the best in four years for the region’s office sector.
In all, just under 800,000sqft was let across out-of-town and Newcastle city centre markets, but available space is low, the group said.
Patrick Matheson, partner of office agency for Knight Frank, said: “The year has seen some notable lettings for the city centre with Ernst & Young’s 11,200sqft at City Gate, Penspen Integrity’s 8,000sqft at Central Square and Global Radio’s 14,000sqft at Wellbar Central, Gallowgate being examples.
“Out of town lettings include 40,000sqft and 24,500sqft to Siemens and HP respectively at Cobalt Business Park and 26,000sqft to Cofely Workplace at Quorum.
“These are good lettings which emphasise the strength of the region as a location for business. The market continues to be active with a total of 158 transactions over the year.
“The average city centre deal was slightly higher than previously at 4,375sqft whilst the average out of town deal at 5,388sqft.”
Chris Pearson, partner and Gavin Black & Partners, says the availability of Grade A office space in Newcastle city centre needs addressing.
He said: “There are just two city centre buildings on-site, the 14,000sqft Liveworks and The Rocket at Stephenson Quarter which will deliver 35,000sqft ready for occupation in July 2015.
“Given deals presently in the pipeline, the supply side will get tighter this year. This must inevitably drive rents upwards.”
This view is shared by Knight Frank in its latest Regional Office Market report which says the subdued rental growth over the last few years will change to “strong rental growth over the next 12 months with new development completions securing higher prime rental levels”.
The diminishing availability of Grade A stock and lack of completions is driving this rental growth with, in the case of Newcastle, £25 per square foot expected to be achieved this year.
Vacancy rates are forecast to fall with a softening of incentives to potential tenants.