newcastle office market...key contacts office head peter bowden partner +44 191 594 5003...
TRANSCRIPT
Despite the overarching uncertainty in the economy there continues to be a healthy level of demand in the Newcastle office market, particularly in the smaller size ranges, and we expect to continue through 2019. The main issue will be the continued lack of Grade A stock available, with only the Lumen at Newcastle Helix due to bring new space into the market this year.
With a new headline rent of £24.50 achieved in 2018, we expect rents to move on further in 2019 creating a stronger case for speculative development moving forward
Political uncertainty is causing disruption in Capital Markets, although a positive resolution at the end of March could result in a spike in investor appetite .On a positive note the underlying strength in occupational markets is likely to filter through to rental growth going forward.
Peter BowdenPartner
KNIGHT FRANK VIEW
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018
5.75
%
6.00
%
6.00
%
6.00
%
6.25
%
4.75
%
£116
m
£185
m
£181
m
£50m £6
2m£68m
177,
870 2
20,0
00
260
,214
182,
706
265
,951
236
,928
175,
000
173,
280
234
,000
201
,215
190,
754
198,
154
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018
5.75
%
6.00
%
6.00
%
6.00
%
6.25
%
4.75
%
£116
m
£185
m
£181
m
£50m £6
2m£68m
177,
870 2
20,0
00
260
,214
182,
706
265
,951
236
,928
175,
000
173,
280
234
,000
201
,215
190,
754
198,
154
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018
5.75
%
6.00
%
6.00
%
6.00
%
6.25
%
4.75
%
£116
m
£185
m
£181
m
£50m £6
2m£68m
177,
870 2
20,0
00
260
,214
182,
706
265
,951
236
,928
175,
000
173,
280
234
,000
201
,215
190,
754
198,
154
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
2013 2014 2015 2016 2017 2018
5.75
%
6.00
%
6.00
%
6.00
%
6.25
%
4.75
%
£116
m
£185
m
£181
m
£50m £6
2m£68m
177,
870 2
20,0
00
260
,214
182,
706
265
,951
236
,928
175,
000
173,
280
234
,000
201
,215
190,
754
198,
154
TAKE-UP (sq ft)
Year End 2018 236,928
2018 vs 10 year average +14%
GRADE A SUPPLY (sq ft)
Year End 2018 198,154
2018 vs 10 year average +2.0%
OCCUPIER HEADLINES
INVESTMENT HEADLINES
PRIME RENT (£ per sq ft)
PURCHASERS (last 12 months)
VENDORS (last 12 months)
DEVELOPMENT PIPELINE (sq ft)
OverseasUK Private
INVESTMENT VOLUMES (£)
Year End 2018 £62m
2018 vs 10 year average -36%
PRIME YIELD (NIY)
Year End 2018 5.75%
Forecast 2019 5.75%
NEWCASTLE OFFICE MARKET
£24.50
Year end 2018 Forecast 2019
£25.00• City centre take-up increased by 33% in 2018 to reach 236,928 sq ft. This total is 14% above the 10-year average and the highest total for three years.
• The headline deal during 2018 was the 63,350 sq ft lease to HMCTS at the Civic Centre. This is the first part of a £1bn reform of courts and tribunals. Other deals included Newcastle University firstly acquiring the 14,906 sq ft freehold of Great North House. In Q3, the university agreed a 13,606 sq ft lease at Northumberland House.
• Public Sector occupiers accounted for the highest percentage of take-up in 2018, 29%. However, Professional Services occupiers were the most active accounting for 35% of all deals completed.
• Grade A availability nudged up marginally in 2018 following the completion of works at 71 Grey Street comprising 17,000 sq ft and Central Square South.
• Investment turnover increased to £62m in 2018, a 10% increase from 2017. Notably, fewer deals were completed, 8 compared to 2017, which saw 11 transacted deals.
• The purchase of the St Nicholas Building by MC Thematic Growth Fund for £19.3m was the largest office sale in 2018. Frank Group Recruitment, Sir Robert McAlpine and architect Lichfields are tenants.
• Overseas investment increased in 2018, following the acquisition of Rotterdam House for just over £10m to UKRO. Tenants include Stantec, Ramboll and Regus.
• Domestic investor interest remained strong in 2018 accounting for 58% of volumes. The percentage of overseas money invested in Newcastle offices increased to 27%, up from 11% in 2017.
106,000Speculative
0 0
00
106,000
2019 2020 2021
58%
27%9%
52%
16%
31%
58%
27%9%
52%
16%
31%
ABERDEEN LEEDSGLASGOW BRISTOL EDINBURGH CARDIFFSHEFFIELD NEWCASTLEBIRMINGHAM MANCHESTER
Dates indicate the potential completion date of schemes under construction as at Q4 2018Development schemes are inclusive of both new and comprehensive refurbishment.
£
KEY CONTACTS
Office HeadPeter BowdenPartner+44 191 594 [email protected]
Investment MarketsDickon WoodPartner+44 191 594 [email protected]
Occupier MarketsPatrick MathesonPartner+44 191 594 [email protected]
ResearchDarren MansfieldAssociate+44 20 7861 [email protected]
Important Notice
© Knight Frank LLP 2019 – This report is published for general information only and not
to be relied upon in any way. Although high standards have been used in the preparation of
the information, analysis, views and projections presented in this report, no responsibility
or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage
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