Demand for city centre office space is on the up
In the first quarter of 2014, office agents in Newcastle have all enjoyed a strong uplift in enquiries and healthier demand for offices. This follows a year of improved take-up in 2013 in which City Centre take-up totalled 275,000 sq ft. Whilst the out of town market was dominated by significant owner occupier deals in 2013, the City Centre witnessed the highest level of letting take-up since the start of the recession.
In 2013 the main city centre lettings were PWC’s acquisition of 24,000 sq ft at Central Square South and Barclays acquisition of 35,000 sq ft at East Quay 5. Other deals included the National Audit Office’s acquisition of 9,000 sq ft at St. Nicholas’ Building and Irwin Mitchell and B Sky B acquiring 24,000 sq ft between them at Wellbar Central.
The high level of take-up has led to a shortage of city centre Grade A space to accommodate larger requirements of 15,000 sq ft plus. Until The Rocket at Stephenson Quarter completes in late 2015 there will be no newly developed space coming to the market which may mean that Wellbar Central and the other Grade A buildings can squeeze the level of incentives for new lettings.
The city centre headline rent is £21.50 but there is a range of other Grade A space available at rents of between £16 and £19 per sq ft.
In both the City Centre and out of town markets there is a noticeable lack of inward investment with the take-up predominantly made up of existing occupiers relocating as a result of lease expiries or break clauses. Whilst it is great to see existing companies expand, most people would welcome the news that Newcastle had been chosen for the opening of a new office rather than Glasgow, Liverpool or Cardiff for example. As much as we would like it to, this situation may not change quickly but we do predict that companies will start to make swifter decisions on relocating and have more confidence to expand and invest in new offices. These decisions are commonly a ‘needs must’ situation made on the basis of headcount but the benefits to a business in terms of staff morale and corporate image can often be equally significant.
Naylor’s have just completed the letting of 5,000 sq ft at Tyne House in Newcastle City Centre to encryption security company Omlis. In the same week we have instructed solicitors for the letting of a further 5,000 sq ft of City Centre offices. Whilst the take-up figures for the first quarter of 2014 were down on the three previous quarters it is not uncommon for the first quarter’s figures to be somewhat disappointing, given the annual pre-Christmas slow down.
We are confident that the take-up of offices will grow over of the course of the year and at the same time we expect increasing instances where multiple occupiers are in negotiations on the same accommodation. This has been virtually unheard of over the past six years but is already happening in 2014. Occupiers who want to take advantage of the generous terms still available on office accommodation should be talking to agents now.
Simon Taylor is Head of Office Agency at Naylors Chartered Surveyors.