Newcastle Office Market

A recent 2017 report by Knight Frank, revealed that Newcastle city centre take-up fell by 15% during 2016 reaching 220,000 sq ft.

Business Services accounted for the largest proportion of city centre take-up in 2016 at 22%. There was also a continued increase in activity in the TMT (technology, media and telecom) sector.

Out of town, total take-up reached 492,000 sq ft, with the North East has attracted an increasing number of ‘footloose’ occupiers in recent years.

Key transactions included a 35,000 sq ft letting to Convergys at The Rocket in the Stephenson Quarter. The most significant deal in the TMT sector was Zerolight’s new lease of the entire LiveWorks development on Newcastle Quayside (15,000 sq ft) only months after the building completed.

Metropolis is monitoring around 20 companies with identified or possible office searches in Newcastle.

Figures from local agent Naylors show 177,041 sq ft of out of town office space in Newcastle was let in Q1 of 2017. In contrast, only 33,461 sq ft of city centre office space was let in the same period. In Q1 2017, Frank Recruitment let 19,000 sq ft at the St Nicholas Building, while Sir Robert McAlpine is taking 8,000 sq ft in the same building.

Out of town, Quorum Business Park secured the largest letting with Sitel taking 47,000 sq ft. Other significant deals included Leeds Building Society moving their regional HQ from Silverlink to Cobalt Business Park and Parseq acquiring 20,000 sq ft at Camberwell House, Doxford Business Park.

The office market in Newcastle remains relatively quiet, with the majority of companies approaching lease events in 2017, choosing to renew current arrangements rather than search for alternative space. Future market growth is likely to mainly come from companies outside the region inward investing and expansions.

Edinburgh prospering

A recent report on the Edinburgh office market by property adviser Knight Frank, concluded that around 120,000 sq ft of offices were let in Q3 2016. The July-September 2016 total was slightly down on the first two quarters of the year, but broadly in line with the same period in 2015 (148,000 sq ft).

Technology, media, and telecommunications (TMT) sector companies were the mainstay in the market, accounting for 49,000 sq ft of the Edinburgh-wide take-up – 41% of the total.

Agreed deals included moves by People’s Postcode Lottery, State Street Bank, Intergen, Cirrus Logic and Zonal Retail Data.

The agents said that appetite for Grade A space (newly completed or refurbished) also “remained voracious in the city centre, with 176,000 sq ft  let in the year to date”. Knight Frank say that Edinburgh could outperform the 220,000 sq ft 10-year average for annual city centre, Grade A office take-up, by the end of 2016.

Metropolis is currently tracking some 35 searches for Edinburgh office space 2016-18.  Current large requirements include Ernst and Young (under offer at Atria), Brodies (60,000 sq ft) and Aberdeen Asset Management (80,000 sq ft).

Agents say: “There is a good level of requirements in the market, particularly for sub-5,000 sq ft accommodation. The level of demand should give developers the confidence to start building. Many will be holding out for pre-let opportunities and, although there have been few in the last decade, we’d expect to see more announced towards the end of 2016.”

Speculative schemes include work nearly completed at Quartermile 3, some delay at the Haymarket scheme, construction planned at One Lochrin Square and a start on Chris Stewart Group’s ‘the Mint’ building, where space is under offer. KF also said that landlords are looking to refurbish their existing stock.

 

London Deals Hit New Heights

Central London office lettings in September 2014 reached 1.3m sq ft in 53 medium or large deals, representing a bounce-back after the traditionally slower August deals month.

The yearly total has reached 11m sq ft already and a 15m sq ft total for 2014 is not out of the question. September was characterised by large lettings to Amazon, Parliamentary Standards Authority and Jupiter Asset Management amongst others.

The retail, professional and financial sectors topped the table of lettings by sector. By area, the City accounted for 74pc of the deals, helped by the large Amazon pre-let. Victoria was boosted by a number of large deals.

The volume of grade A (newly built or refurbished office space) let during the month topped 800,000 sq ft and matches the momentum of new space lettings from earlier in the year.

A survey out this week from Knight Frank reveals that demand from companies looking for London offices has reached a 14 year high, with many requirements from non-traditional sectors. To underline this there are now over 750 active London requirements on the Metropolis database and a further 2-3m sq ft of potential requirements in the pipeline.

London offices leading the economy?

Market updates by four London agents this week suggest the London office letting market is becoming one of the most positive indicators that the UK economy has started recovering.  Just-released data from Knight Frank, Cushman & Wakefield, CBRE and Jones Lang LaSalle points to a second consecutive quarter of above 3m sq ft of office lettings.

The reports use phrases such as “a new cycle” and “the tipping point of the market is close” as part of an upbeat assessment, which includes predictions of a further 1.2m sq ft of deals due to be signed in the next two months, leading to nearly 7m sq ft predicted to be transacted in the City alone, this year, together with a 5% increase in rents.

Metropolis letting figures for London back this up, with office take-up nearly 20% ahead of the same point in 2012 and an increase in the number of central London requirements for 2014 and 2015. However, this is slightly tempered by a shortage of deals in regional cities, which continues to subdue the overall office market activity for the whole UK.