Kevin McGorie, partner in our Newcastle agency team has shared his thoughts on the North East commercial property market.
“Cranes on the skyline are always a good sign within the property market. Unfortunately, over the past decade, this has been a sight few and far between in Newcastle, with the exception of student residential developments. However, as Newcastle has continued to grow as a northern powerhouse we are now reaping the rewards of a strengthening office market and continued demand by hoteliers in the region.
In the hotel market we have recently seen the completion of the 4* award winning Maldron Hotel development, which was built by SW’s prestigious clients McAleer & Rushe. There has also been the conversion and redevelopment of the old BT offices on Newcastle Quayside which have been converted to a new Travelodge and a purpose built Melia Hotel with the latter development well underway, another development undertaken by one of our well-respected clients, Union Properties.
As the hotel market continues to grow it is the office market in the region which is making the biggest strides, with office rents on the brink of hitting the lofty headline figure of £25 per sq ft for the first time ever in the region.
Central Square South’s refurbishment, which is the new home of Sanderson Weatherall in Newcastle, has been the driving force behind the jump in headline rents with owners Aberdeen Investments attracting new tenants Towergate Insurance and HGF Ltd, as well as ourselves, all breaking the former headline rent of £23.50 per sq ft, with the latter deals moving in excess of £24 per sq ft. This has given new confidence to developers in the market and the higher headlines rents have brought a new raft of investors looking to get into the market to provide Grade A office accommodation. There is no doubt that there is a continued lack of supply of true Grade A space in the market and this shortage will continue to cause pressure on Grade A rents with an upward trend likely to continue. This will be relieved by the completion of the 108,000 sq ft Lumen development at Science Central, and our clients Strawberry Place development which will provide 160,000 sq ft of high-class Grade A space, and of course the 120,000 sq ft Bank House at Pilgrim Street.
Prime office yields in Newcastle have also dropped sub 6% for long term income which will help developer confidence in the market place.
The sentiment in the office market is looking likely to spread with speculative development also underway across the water at Baltic Quays, with Gateshead Council constructing 33,000 sq ft of Grade A accommodation, which will be followed by a further 55,000 sq ft at Millenium Quay on Gateshead Quays.
Further afield we are seeing new build offices at Milburn Gate (Durham), Centre Square (Middlesbrough), The Beam (Sunderland) and Feethams (Darlington), which is a sign of the continued strength of the wider region.”