| the north east
IN MY VIEW... Q
3 2017 is upon us, it is worth dwelling on how the North East Office Market
has performed so far this year and what the outlook is for the future. Newcastle’s occupational market
continued its upward trajectory in the first quarter of 2017, with a total of 210,502 sq.ft of floor space leased, pushing the figure ahead of the five year quarterly average and 22% higher than the same period in 2016. However,
Michael Downey
activity was dominated by the out-of- town market, which accounted for 84% of the total volume
of space transacted. While this was due, in part, to the increased volume of transactions in the out-of-town market - some 50% higher than the same period in 2016 - the city centre’s dearth of Grade A accommodation and lack of demand from larger corporates is holding the market back somewhat. While there is a lack of good quality stock within the city, there has also been little appetite from occupiers. With very few requirements in the market
By Michael Downey, Office Advisory, Lambert Smith Hampton
for floorplates north of 10,000 sq.ft, this is likely to temper H1 take-up figures somewhat. Grade A office supply across Newcastle
City Centre continues to dwindle, albeit at a slower rate than anticipated and currently stands at circa 155,000 sq.ft, a fall of 11% from the previous quarter. The only letting of Grade A specification in Q1 2017 was 19,200 sq.ft at The St Nicholas Building to Frank Recruitment Group. Unless landlords adopt a pro-active approach in refurbishing the existing stock to a much higher standard than is currently available there will be very little interest accrued from occupiers going forward. The nature and type of refurbishment
also plays a key role, landlords have to anticipate occupational demand and the type of space tenant’s now require. The decision makers within organisations are beginning to involve Generation X and Millennials when considering an office move. Contemporary office accommodation with exposed services and architectural lighting is becoming increasingly popular in the North East. The rise in the Information and Communications Technology (ICT) sector has contributed to this, albeit, other sectors are beginning to stray away from a traditional fit-out, in
L&G’S FIRST BUILDING AT NEWCASTLE SCIENCE CENTRAL
for the first of its grade A office buildings at Newcastle Science Central. Designed by international design practice, Ryder Architecture, the 100,000 sq ft office building will create modern workspace for over 1,200 people in the science, technology and the knowledge sectors. Set to create over 4,000 jobs, 500,000
L
sq.ft of office and research space, and 450 new homes, Newcastle Science Central is one of the biggest urban regeneration projects of its kind in the UK. Comprising a 24 acre science and technology hub on the former Newcastle Brown Ale brewery site, located in Newcastle’s city centre, the aim of the development is to become a major UK hub for scientific research and technology businesses, creating knowledge based jobs for future generations in Newcastle. In June 2016 Legal & General Capital,
the investment arm of Legal & General Group, became the long term investment partner with Newcastle City Council (NCC) and Newcastle University (NU), to build and finance the Newcastle Science Central development. The office building will be clad in steel
50
egal & General has announced that it has submitted a planning application
and glass, referencing the region’s steel manufacturing and ship building heritage. The earthy copper tones also link to the history of the site and this dramatic addition to the Newcastle skyline promises to set the standard for the future phases of the L&G investment programme. The building is designed to achieve British Council for Office (BCO) standards, with an occupancy ratio of one person per 8sqm net office space. Vehicle access, disabled parking and drop off points will be incorporated into the adjacent public realm. It will also benefit from a generous double height reception space and a café. Newcastle City Council will manage
and operate the building when complete. This first office building is due to be
followed by a second, adding a further 100,000 sq.ft to the site. The two office buildings, along with The Core – a 27,000 sq.ft space for start-ups and SMEs – will form the gateway to Science Central. The area between the three buildings will also be transformed into a public square, improving accessibility to the site and providing a significant amenity for office workers, visitors and the surrounding community.
return for a more contemporary feel. As the fixed desk environment becomes
a thing of the past, occupiers are now introducing hot desking as a modern method of working. Not only does this tighten their size requirement and reduce occupational costs, but also helps create an enriched environment allowing their employees to feel empowered, which in turn increases staff retention and productivity. The take-up figures for the 2nd quarter
are yet to be released but we do not expect city centre demand to rebound in spectacular style with a snap election no doubt playing a part in creating more uncertainty within the market. As we enter H2, the Grade A supply will still continue to tighten. With at least two years until Science Central comes to fruition landlords are continuing to refurbish existing Grade B stock in order to satisfy occupational demand. With less than one years’ Grade A
supply left in the marketplace and headline rents looking to increase beyond £23.00 per sq.ft we should begin to see renewed appetite from developers to return to the market and provide speculative office development without any third party intervention, something we have not seen since 2008.
MOVING FORWARD N
ewcastle Science Central is moving forward at pace with five buildings set
to come online in the next three years. Following The Core and The Key, the Urban Sciences Building (USB) is next on site and will open in August this year. Home the Newcastle University’s School of Computing Science the USB will be used to trial new energy systems, novel materials and smart engineering - a ‘living laboratory’ underpinning research to make urban centres more sustainable for future generations. Construction has also started on
Newcastle Laboratory. Providing over 70,000 sq.ft of bespoke laboratory space, offering high quality, incubation and grow- on space, the building will be ready for life science business in August 2018. Legal & General Capital’s recent £65m
investment will bring forward two Grade A office buildings providing an additional 200,000 sq.ft. Ryder Architecture have been appointed to deliver the first phase, office A, providing modern workspace for over 1,200 people in the science, technology and the knowledge sectors. Added to this are Newcastle
University’s Learning and Teaching Centre, the National Innovation Centre for Ageing and the National Innovation Centre for Data, all due to open by 2020.
COMMERCIAL PROPERTY MONTHLY 2017
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