There are clear signs of improvement in certain sectors of Newcastle’s property market, giving us cause for cautious optimism.
I know we have a good deal of recovery to come, but to borrow Ian Dury’s phrase, we do have some reasons to be cheerful.
I don’t agree with the much-aired view that high street retailing is dead and that every high street is full of empty properties.
Newcastle’s retail market is very diverse and the city centre’s shopping continues to evolve. Northumberland Street is regarded as one of the finest high streets in the country. Blackett Street is undergoing something of a renaissance with the Hammerson development of the former Monument Mall.
Eldon Square continues to trade well but doesn’t dominate the city in the way other cities are dominated by newer centres.
Interestingly, we are seeing changes in some of the poorer locations on the fringes where new users are taking up vacant space.
This includes leisure users taking accommodation that was formerly retail. Prominent examples include the recent letting to London Restaurants Grey Street Ltd by Storeys Edward Symmons of 9,000 sq ft on Grey Street and Market Street for restaurant use. We’ve also seen retailers like Tesco opening a convenience store on Saville Row and the Co-op on Market Street. I think these patterns will be replicated elsewhere and will contribute to the changes in the city’s retail scene.
It’s not all rosy sadly. Some poorer locations are struggling as retailers are opportunistic and when times are difficult, there is movement in terms of quality of pitch.
There is increased activity in the city centre offices market, where small suites and flexible terms are the key to success.
Though the market remains challenging, smaller transactions, of generally below 5,000 sq ft, dominate the market. This was reflected in the first quarter’s figures for 2013 totalling a take-up of 44,124 sq ft which, if it continues in the same vein, will exceed 2012’s take-up figure of 154,200 sq ft.
Prospective tenants for smaller suites require flexible terms – ideally short-term leases or longer leases with break clauses. There has been increased activity in the serviced office sector or buildings that are able to offer space on easy in/easy out terms, albeit maybe not on a fully-serviced basis. An example of one such building is Alderman Fenwick’s House on Pilgrim Street which is one of Newcastle’s oldest listed buildings and has been beautifully restored to provide unique office accommodation, where we are sole letting agents.
Further examples demonstrating the success of a flexible approach include Clavering House, to the rear of Central Station, which was jointly marketed by Storeys Edward Symmons and DTZ for Robson Brown, who were successful in letting the building to a number of smaller companies. The success of the exercise resulted in an overriding lease being agreed to Newcastle Business Village, which now operates the whole building as a serviced office centre.
Looking forward, the availability of Grade A space in the city centre is unlikely to increase, with no real prospect of speculative development for some time. Although there are only a limited number of larger enquiries in the market, those companies requiring large open plan floor plates and Grade A space have an increasingly limited choice. The development of the strategically important Stephenson Quarter is eagerly awaited by the city, and undoubtedly represents one of the most important development projects we’ve seen since the redevelopment of east Quayside. The 10-acre site now has detailed planning consent for a mixed-use scheme which will include hotels, offices, apartments and retail space. Phase One, which is located to the west of the site at the junction of Forth Street and Forth Banks, will include a 254-bedroom Crowne Plaza four-star hotel, a 326-space car park and 35,000 sq ft of offices with an additional 12,000 sq ft office building. Newcastle City Council, which has joined in as a funding partner with Silverlink Property Developments, also approved amendments to the proposed development plans for the scheme.
Commencement of the development will be a welcome boost to the city’s economy. However, a number of other hotels are proposed for the city centre, so the timing of the development of the Crowne Plaza hotel on the site will be crucial. Other development going on nearby includes the new police headquarters on the west side of Forth Banks. In addition, there are major plans to upgrade the Central Station and the debate about providing a link from the south side of the station to Stephenson Quarter rumbles on.
The development of the Stephenson Quarter should trigger further investment to the west of Forth Banks. There is already firm interest in a 1.27 acre site that we are marketing on Forth Banks, to the south of the new police headquarters, which could accommodate a 200-bedroom hotel.
Student accommodation is also attracting investment in Newcastle. We are noting high prices being achieved for sites. A site at Hill Court site has been marketed by Newcastle City Council, and is under offer for student accommodation and Downing Developments has submitted an application on the last remaining undeveloped site at Downing Plaza between Sandman Signature Hotel and the Newcastle University Business School for more student accommodation. Storeys Edward Symmons was involved in the sale of a site on Pitt Street, Newcastle, on behalf of Newcastle United to Crosslane Developments.
The relationship between property and finance in the commercial market is crucial, as is confidence in the market. A shortage of lenders makes borrowing difficult for most developers or investors, who would need a higher percentage of their own money. On the plus side, this has led to more realistic pricing levels for investment, which has brought buyers back into the market because of perceived improvements in value.