| the north east
LAND AND DEVELOPMENT MARKET PLACE – NORTH EAST T
he residential land market in the North East remains an interesting sector to be working in. The start of 2016 was very slow with not many sites coming to the market and comparatively fewer transactions taking place year on year. This is partly down to many of the volume house
David Craig
builders now gaining consent and developing
substantial strategic edge of settlement green field sites which were acquired following the introduction of the National Planning Policy Framework. The general shorter supply of sites being offered to the market from both the private and public sectors (both of whom are considering alternative delivery mechanisms) has also slowed activity in the market. Medium sized sites (capable of delivering at least 50 units) situated within good locations continue to attract good levels of interest with gross greenfield land values in excess of £1 million per
developable acre not uncommon. In terms of sites which are located in weaker market areas, we have seen an element of interest, albeit with offers significantly reduced to reflect location, values and risk. Whilst house prices are generally increasing, land values are not necessarily increasing at the same rate. This is a result of the increase in build costs over the past 24 months following a shortage of supply of labour and materials. In addition, policies which have been, and are due to be adopted such as CIL, Starter Homes and changes to Stamp Duty Land Tax will and have had their part to play in influencing values for development land.
Established University locations such as Newcastle and Durham city centres have continued to see strong demand from student housing investors and developers alike. Newcastle city centre has continued to experience significant demand from developers looking for prime city centre sites capable of delivering over 100 units. Land values for student development sites typically equate to £7,500 - £12,500 bed per bed; however, we have in some instances been involved with transactions
by David Craig, MRICS, Senior Surveyor, Bilfinger GVA Newcastle
which have exceeded these levels. The demand for prime city centre student housing development sites would appear to be underpinned by the growing number of wealthy foreign students who are looking for top specification accommodation within very close proximity to the city centre and universities. We are advised that in some instances weekly rents have exceeded £200 per week - which is quite phenomenal. There has been limited speculative office or industrial development within the region since the economic downturn, however, as a result, we have seen a marked increase in Grade A office space and prime industrial rents as a result of the lack of good quality supply. If rents continue to rise at the same rate due to a lack of good quality stock then a return to speculative commercial development may be forthcoming. Of course, all areas of commercial and residential property face the uncertainty of the fast approaching Europe vote on June 23rd and it will be interesting to see what the effect is, not just here in the north east, but across the wider national property market. The final half of 2016 is certainly going to be just as interesting as the first.
THE BIG NINE REGIONAL OFFICE QUARTERLY REVIEW B
ilfinger GVA’s “The Big Nine” Regional Office Quarterly Review reveals that the first quarter of 2016 has witnessed the highest level of take-up during Q1 across the Big Nine cities since 2008. This amounts to 2.3 million sq.ft some13% above the five-year quarterly average. This continues the strong occupational story of the past two years with Q1 figures characterised by a significant number of larger deals: six over 50,000 sq.ft, with Morgan Stanley’s 155,000 sq.ft pre-let in
Tony Wordsworth
Glasgow standing out. In Newcastle, the out-of-town market
continues to dominate occupier activity in Newcastle. Q1 take-up amounted to 143,500 sq.ft, 17% above the five-year quarterly average. Sitel took the largest deal, 48,000 sq.ft at Q4, Quorum Business Park, while Accenture has taken a further 15,000 sq.ft at Cobalt Business Park. Availability on these two business
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parks has fallen considerably over the past eighteen months with a steady level of deals. Elsewhere out-of-town, Litterboss has acquired 12,100 sq.ft at Digital House, Team Valley. Tony Wordsworth, Director and Head
of Office Agency at Bilfinger GVA, Newcastle comments: “Grade A availability in the city centre now stands at 130,000 sq.ft. Based on average past take-up rates, this equates to around 1.5 years’ supply. However, the Stephenson Quarter’s 35,000 sq.ft Rocket, completed at the end of last year, is rumoured to be under offer.” He continues; “With prime supply diminishing, refurbishments are coming forward. Commercial Estates Group is refurbishing 60,000 sq.ft at Cuthbert House and Schroders is undertaking a 10,000 sq.ft major refurbishment of Earl Grey House. These refurbishments will be seeking to establish a new level of rent for refurbished stock, which currently stands at £17.50 per sq.ft. Following EY’s 22,900 sq.ft deal at One City Gate East at the end of last year, headline rents have
increased to £22 per sq.ft.” This equates to a net effective rent increase of 14% over the past year. Rental aspirations from developers however are likely to be closer to £24 per sq.ft before any further new build speculative schemes get under way. With its 12 offices, headquarters in
London and 700 fee-earners around the UK, Bilfinger GVA offers the country’s largest and most diverse multidisciplinary property consultancy outside of the capital. Bilfinger GVA is a Bilfinger Real Estate
company, one of Europe’s leading real estate managers, with approximately €54 billion in assets under management. As part of the globally operating engineering and service group Bilfinger SE, Bilfinger Real Estate offers integrated property service and advisory from a single source. Bilfinger GVA’s overall business, which
is 80% consultancy-based, generated a turnover of £157.6 million year ending 30 April 2014, up from £147.3 million the previous year. For further information please visit
www.gva.co.uk
COMMERCIAL PROPERTY MONTHLY 2016
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