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The challenges for the North East are clear says G9, with the debate now daily, the outcome of which can only be guessed at. For the region, in the wings is regional devolution with still no clear path ahead and of course there is Brexit, the negotiations for which have hardly started. There is some uncertainty as a result for a region that has a high level of exports, indeed the only UK region with a positive trade balance as a result.
The 6th annual sentiment survey, with forecasts for 2017, involved input from Bill Lynn, director – Capital Markets, Lambert Smith Hampton; Gavin Black, partner, Gavin Black & Partners; Angus White, managing director, Naylors; Robert Patterson, partner, Sanderson Weatherall; Tony Hordon, partner – Office Agency & Development, Head of Office, Cushman & Wakefield; Russell Taylor, director, HTA Real Estate; David Furniss, director, BNP Paribas Real Estate; Peter Bowden, partner, Office Head, Knight Frank and Roger Speirs, regional senior director, Bilfinger GVA.
G9 chairman, Gavin Black, says the findings “are extremely valuable at a time when Brexit was not heard of a year ago and regional devolution involving the seven Local Authorities has imploded”.
“Events pre, during and post survey have been mercurial creating both division and uncertainty,” says G9’s chairman, Gavin Black. “Fortunately for the region Nissan’s decision to make its next two vehicles – the new Qashqai model and its X-Trail SUV – at its Sunderland plant, and securing not only 7,000 jobs but creating a further 1,000 jobs in addition as well as securing some 30,000 in the supply chain was just the good news required.
“It underlines so much about the North East – its location, infrastructure, work force. It is a very good place in which to do business,” says Mr Black adding that the Nissan decision will act as a catalyst to bring forward the Sunderland/South Tyneside’s £295m International Manufacturing Park immediately north of Nissan.
Retail is thought to be the sector at most risk of having a difficult year though prime retail will be in a sound position as consumer confidence recovers. However secondary retail will continue to be difficult.
There is a lack of office supply particularly in Newcastle city centre. In the short term refurbishment is more likely but availability will eventually come through L&G’s involvement at £350m Science Central project, one of the biggest urban regeneration projects of its kind in the UK. Here this Newcastle City Council Joint Venture vehicle with Legal & General and Newcastle University will see a speculative office building of 100,000 sq ft on site during the middle part of 2017 with the likelihood, when the agreed % proportion of this building is let, it will trigger phase 2 which will be a building of 120,000 sq ft.
The strongest sector in 2017 will be industrial and logistics. Demand for this sector will increase as a result of post Brexit issues including the fall in the £ which will assist manufacturers. Rents have increased substantially and are now in the range £6 – £6.50 psf.
Though this sector is very sensitive to the whole Brexit argument there seems to be an underlying strength which is not evident in other sectors. Industrial investment has been very popular due to higher returns and the market has been overheated. There are still growth sectors and demand as a result such as for online retailers, parcel depots, the energy sector as well as automotive.
There are opportunities for continued public sector intervention, as shown by Newcastle City Council and its involvement in The Rocket office development, without which the development would not have materialised. There is no reason why this sort of intervention cannot, successfully, be delivered again. Otherwise the pre-let development route remains the only way forward.
For Investors there is lots of interest in the industrial/distribution sector and increasingly in City Centre offices where space can be refurbished and re-let with increase in rent. The industrial sector has seen full prices being paid due to the lack of stock.
About G9 – Formed principally on the back of the demise of OneNorthEast in the spring of 2012, G9 is an informal lobby group comprising leading North East commercial property chartered surveyors (Lambert Smith Hampton; Gavin Black & Partners; Naylors; Sanderson Weatherall; Cushman & Wakefield; HTA Real Estate; BNP Paribas Real Estate; Knight Frank and Bilfinger GVA) brought together to act as one in addressing the key issues affecting the region’s global profile and the potential threat to successfully attracting inward investment.