Investment and the widening economic recovery is driving a surge in demand for commercial property, according to the latest RICS (Royal Institution of Chartered Surveyors) Commercial Market Survey.
During the first quarter of the year, the North East saw a significant upturn in demand for office space, with 38% more respondents seeing more prospective interest.
As a two-to-three month lead indicator on figures from the ONS (Office for National Statistics), the data shows that as tenant demand and investment into the commercial sector have increased, so have employment and GDP growth in the UK.
Since the end of 2012, demand for commercial property in the North East has risen rapidly, but the resulting tightening of the market has seen rents rise and availability fall.
As a result 22% more surveyors in the region are seeing a fall in the availability of commercial space, and almost one in four (23%) expecting rents to rise over the coming three months, rather than fall.
As availability declines, the impact of these tighter market conditions on rental expectations has resulted in them edging upwards.
This is particularly apparent across offices and industrial space in the North East, while retail rental expectations continue to lag behind, with 14% more respondents expecting retail rents to increase.
David Jackson of Jackson & Partners said: “Although there has been a general improvement in market confidence, overall there is still some caution.
“The North East still has a lot of vacant office space and a shortage or large industrial buildings.
“We need to see a closing of the gap between values of existing and new build premises as new development is marginal at best. Empty business rates continue to be a factor in restricting growth.”
Simon Rubinsohn, RICS chief economist, said: “The strength of the latest commercial property survey suggests that the underlying momentum of the economy will continue to accelerate through the course of this year.
“What is particularly encouraging is that a better tone to the results is visible in all parts of the country and increasingly in secondary as well as prime space.
“Given that these indicators have historically provided a strong steer as to the performance of the economy two to three quarters out, it is hard not to be encouraged by the conclusions of this report.”