Newspaper article The Journal (Newcastle, England)

Investment Market 'Remains Active'

Newspaper article The Journal (Newcastle, England)

Investment Market 'Remains Active'

Article excerpt

IT'S been a turbulent few months for the Government's Northern Powerhouse initiative as a whole, yet 2016 has been something of a "Goldilocks year" for the region's office market -according to research from national commercial property consultancy Lambert Smith Hampton (LSH).

Looking specifically at Newcastle, LSH's second annual Northern Powerhouse Office Market Report, which provides its investor, developer and occupier clients with a detailed insight across the region, notes that Newcastle's prime headline rent increased by 5% in 2016 to a new high of PS23 per sq ft.

Recent speculative development completions in the city centre have now been taken-up, leaving only 10,977sq ft of new-build space available at The Jesmond on the outskirts of the city centre.

put However, Newcastle has seen a very active investment market during 2016, with over PS200m of office assets changing hands in the city, almost double the 10-year average.

Moreover, recent evidence from bidding at the sale of Sandgate House indicates that prime office yields hardened back to their pre-EU Referendum level during Q3 to stand at circa 5.75%.

Newcastle's 2016 office market take-up has been constrained by a lack of quality supply, while conversions to student accommodation are removing some secondary and obsolete stock from the market.

No schemes are under construction but two major developments are proposed which could bring muchneeded space forward, including 200,000sq ft at Science Central, a joint venture between Legal & General and Newcastle City Council.

On face value, the report notes that activity in Newcastle city centre during the first three quarters of 2016 has been disappointing; take-up of 120,167 sq ft is more than 40% down on the equivalent period of 2015.

However, the fundamentals of the market remain positive for investors and developers, with tight supply, steady demand and rental growth firmly on the agenda.

Despite a steady level of active demand and a rebound post-EU Referendum, Q4 office take-up is expected to bring the 2016 total to circa 160,000 sq ft for Newcastle's city centre, 33% below the 10-year average. …

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