With the base rate now standing at 5.5% and the prospect of a further increase in rates later this summer, you would have expected our local commercial property market to be cooling. As evidenced, by the attached deals table however this does not appear to be the case - or perhaps our region is just bucking the trend!
Anyone visiting our region cannot be anything other than impressed by the substantial amount of regeneration that is taking place. Construction prices are on the up and contractors and property professionals are crying out for people with the correct skill levels to work for them.
At Faverdale in Darlington, Easter Group has recently completed the construction of 190,000 sq ft of industrial/warehouse units which are now being actively marketed. The site is adjacent to the enormous Argos distribution centre which was completed last year and the site provides excellent road links via the A1. Easter has also recently commenced development at Riverside Park in Middlesbrough of 11 units comprising 65,000 sq ft and whilst the units are not scheduled to be practically completed until November of this year they are already attracting strong interest.
Perhaps the largest development to commence in our region is at Rainton Bridge in Sunderland where McQuarrie Goodman (Akeler) have commenced construction of some 250,000 sq ft of offices for Northern Rock. This development will eventually house some 3,000 workers and Rainton Bridge is obviously a popular location with McInnerney Homes having recently acquired a 11,000 sq ft building at the same location as its regional headquarters. When fully developed, Rainton Bridge will provide 800,000 sq ft of office space.
Not to be outdone however Newcastle will also see some impressive developments commencing this summer. It has recently been announced that 120,000 sq ft of office buildings will be commenced on a speculative basis at Newcastle Great Park. This 1,200-acre development site which is already home to Sage is expected to ultimately comprise £800m of commercial buildings.
Newcastle University Business School has also announced that it will be acquiring 100,000 sq ft of space in a new building to be constructed on the site of the former Welbar House on Gallowgate which is currently under demolition.
This part of Newcastle city centre is certainly a hotbed for office development with Time Central (which is already fully prelet) being scheduled to be completed in early 2008 and with Hanro scheduled to start work on their development at Strawberry Place shortly.
At Belmont in Durham, Argon has recently completed Phase 3 of its industrial development and commenced development of Phases 4 and 5. All of the phases have been forward sold to Henderson Global Investors which is a clear indication that the Funds remain very much in the market and are looking to secure sites at an early stage.
In Sunderland, Adderstone Group will be commencing later this month the first phase of its £18m development of Quay West Riverside Business Village. This 4.5- acre site will ultimately comprise 42 smaller office units which will total in excess of 100,000 sq ft.
This office village concept has proved a popular one in other parts of the region with The Watermark and Gosforth Business Park being two of the most successful ones.
In Gateshead, construction of Baltic Place on behalf of South Shore Developments continues apace and the new campus for Gateshead College is also now well under way.
On the opposite side of the river however, it looks as though Imperial Quay will now go back on the market. This quarter acre site is intended to be developed to comprise 100,000 sq ft of offices, 13 storeys of apartments, a restaurant and multi storey car park. It is reputed that when this site goes back on to the market it could be sold for in excess of £5m.
Having worked in the North-East for over 12 years, I cannot recall a time when there has been so much development activity spread across our region. It would be easy to say that we are heading for an over- supply of accommodation and that the market is overheating but some of our more pessimistic commentators have been saying that for quite a number of years already. As a "half full" man myself I take the view that I would rather have all of these fantastic developments happening in our region than not!
May I please pass on my thanks to all those surveyors who have supplied the information which has enabled us to compile the attached deals table.
Jonathan Combe is a partner and head of the property group at Robert Muckle.