Railway pioneer George Stephenson was born in the North East. Now, property people are invoking his spirit to inject new life into Newcastle’s office market. One of four potential large-scale regeneration schemes (see map) has been named after the engineer and the first phase, which completes shortly and where 35,000 sq ft is up for grabs, is named after his most famous steam locomotive.
The Rocket is one of only two new-build grade-A properties in the city centre – the other being 14,000 sq ft at the Live Works building on Quayside, also due to complete shortly. “This could spark a round of activity in the rest of the year as competition for new office premises in the city centre strengthens,” says Patrick Matheson, partner at Knight Frank. Local sentiment suggests that all of this space is likely to be taken before the end of this year and that the £22 per sq ft quoting rents at The Rocket will be achieved or even exceeded.
Even so, Newcastle has so far failed to build up enough steam to power a major office project. “There’s unlikely to be any further speculative development until The Rocket is let,” predicts Lambert Smith Hampton director Neil Osborne. “The key to any site coming forward will be funding, if there is no prelet in place. This could come about in a similar way to the first phase of development at Stephenson Quarter where the council took a prelet to enable forward funding.”
Rents will also have to race ahead significantly, local agents point out, if they are to reach the £25 per sq ft needed to make development appraisals stack up. “Contrast our situation in Newcastle with Leeds, where product is going up and rents make that viable,” says Sanderson Weatherall partner Robert Patterson.
One of the factors that may be slowing office development down is the remarkable appetite for student housing, which – together with other uses – has taken huge chunks out of the potential office pipeline. Mike Cuthbertson, regional senior director at Bilfinger GVA, says: “Over the past three years, we have lost 340,000 sq ft to alternative uses, with more than 150,000 sq ft likely over the next 12 months.”
With a hiatus in brand-new offices, attention is turning to refurbished space, where rents are moving above £20 per sq ft. A makeover is on the cards at buildings such as Hawthorne House, Forth Banks (12,000 sq ft), and this month 20,000 sq ft will be launched to the market at St James Gate, where two floors will be fully refitted. “For now, it will be very much individual floors in a variety of buildings,” says Knight Frank’s Matheson.
Demand remains largely based on local churn, with companies such as Greggs consolidating into out-of-town space (see box). But some, including Cushman & Wakefield director Tony Hordon, are hopeful of snagging a footloose occupier. “We are monitoring a requirement for 100,000 sq ft from a company not at present represented in the North East.” Bagging that kind of tenant would surely give the green light to a new wave of office development.
Out of town
Greggs new headquarters at Quorum Business Park
While Newcastle city centre has become known for its lack of grade-A offices, the reverse is true for the region’s major business parks, including Cobalt and Quorum, where speculatively built space is awaiting tenants. A spate of out-of-town deals in the first half of this year, totalling 375,000 sq ft (and 12% up on the same period in 2014), has reduced availability on both parks – down to around 290,000 sq ft and 340,000 sq ft respectively.
The biggest letting in the out-of-town market for five years was to Utility Wise, which took 80,000 sq ft at Cobalt 22 last September. Aidan Baker, director at BNP Paribas Real Estate, the letting agent on the 250-acre Cobalt Park, says the deal marks an expansion for the firm. Terms were undisclosed, but quoting rents are £16 per sq ft at the park, with 12 months rent free on a five-year lease.
Meanwhile, one of the most recent transactions was the letting to Greggs of 31,000 sq ft Building Q9 at Quorum. Robert Patterson, partner at Sanderson Weatherall, who acted for the baker, says that several locations were considered that were either new-build or extensions to existing buildings, including in the city centre and on Cobalt. “However, there weren’t many options available with their own front door,” says Patterson. That was something that appealed to the firm, at present located in several places, including Fernwood House, Jesmond, and Innovate House at Balliol business park. It will now move its headquarters operations into a single building at Quorum early next year.
Greggs has signed a 10-year lease, and although the rent hasn’t been disclosed, it is understood that a figure close to current asking rent of £15.95 per sq ft was agreed. “There aren’t that many FTSE companies in the North East, so it was good to get one of them here,” says Fergus Trim, development director at Broadoak Asset Management, owner of Quorum. “A lot of companies are in growth mode and we have product that is ready to go. Plus, Newcastle is still good value compared with Manchester and other cities for companies considering north-shoring.”
It may seem premature to think about new development out of town, but if take-up continues at current levels, the next generation of buildings will be required within the next couple of years.
“It’s likely to take place around the airport,” predicts Cushman & Wakefield director Tony Hordon, “where several parties are looking at doing something, which may well come forward before the end of the year.”
The only speculative development that will be delivered on Tyneside outside Newcastle city centre this year is The Jesmond, which will provide 11,000 sq ft of grade-A space next to West Jesmond Metro station.
[caption id="attachment_832098" align="alignright" width="300"] The Rocket, Stephenson Quarter[/caption]
Railway pioneer George Stephenson was born in the North East. Now, property people are invoking his spirit to inject new life into Newcastle’s office market. One of four potential large-scale regeneration schemes (see map) has been named after the engineer and the first phase, which completes shortly and where 35,000 sq ft is up for grabs, is named after his most famous steam locomotive.
The Rocket is one of only two new-build grade-A properties in the city centre – the other being 14,000 sq ft at the Live Works building on Quayside, also due to complete shortly. “This could spark a round of activity in the rest of the year as competition for new office premises in the city centre strengthens,” says Patrick Matheson, partner at Knight Frank. Local sentiment suggests that all of this space is likely to be taken before the end of this year and that the £22 per sq ft quoting rents at The Rocket will be achieved or even exceeded.
Even so, Newcastle has so far failed to build up enough steam to power a major office project. “There’s unlikely to be any further speculative development until The Rocket is let,” predicts Lambert Smith Hampton director Neil Osborne. “The key to any site coming forward will be funding, if there is no prelet in place. This could come about in a similar way to the first phase of development at Stephenson Quarter where the council took a prelet to enable forward funding.”
Rents will also have to race ahead significantly, local agents point out, if they are to reach the £25 per sq ft needed to make development appraisals stack up. “Contrast our situation in Newcastle with Leeds, where product is going up and rents make that viable,” says Sanderson Weatherall partner Robert Patterson.
One of the factors that may be slowing office development down is the remarkable appetite for student housing, which – together with other uses – has taken huge chunks out of the potential office pipeline. Mike Cuthbertson, regional senior director at Bilfinger GVA, says: “Over the past three years, we have lost 340,000 sq ft to alternative uses, with more than 150,000 sq ft likely over the next 12 months.”
With a hiatus in brand-new offices, attention is turning to refurbished space, where rents are moving above £20 per sq ft. A makeover is on the cards at buildings such as Hawthorne House, Forth Banks (12,000 sq ft), and this month 20,000 sq ft will be launched to the market at St James Gate, where two floors will be fully refitted. “For now, it will be very much individual floors in a variety of buildings,” says Knight Frank’s Matheson.
Demand remains largely based on local churn, with companies such as Greggs consolidating into out-of-town space (see box). But some, including Cushman & Wakefield director Tony Hordon, are hopeful of snagging a footloose occupier. “We are monitoring a requirement for 100,000 sq ft from a company not at present represented in the North East.” Bagging that kind of tenant would surely give the green light to a new wave of office development.
Out of town
[caption id="attachment_832099" align="alignright" width="300"] Greggs new headquarters at Quorum Business Park[/caption]
While Newcastle city centre has become known for its lack of grade-A offices, the reverse is true for the region’s major business parks, including Cobalt and Quorum, where speculatively built space is awaiting tenants. A spate of out-of-town deals in the first half of this year, totalling 375,000 sq ft (and 12% up on the same period in 2014), has reduced availability on both parks – down to around 290,000 sq ft and 340,000 sq ft respectively.
The biggest letting in the out-of-town market for five years was to Utility Wise, which took 80,000 sq ft at Cobalt 22 last September. Aidan Baker, director at BNP Paribas Real Estate, the letting agent on the 250-acre Cobalt Park, says the deal marks an expansion for the firm. Terms were undisclosed, but quoting rents are £16 per sq ft at the park, with 12 months rent free on a five-year lease.
Meanwhile, one of the most recent transactions was the letting to Greggs of 31,000 sq ft Building Q9 at Quorum. Robert Patterson, partner at Sanderson Weatherall, who acted for the baker, says that several locations were considered that were either new-build or extensions to existing buildings, including in the city centre and on Cobalt. “However, there weren’t many options available with their own front door,” says Patterson. That was something that appealed to the firm, at present located in several places, including Fernwood House, Jesmond, and Innovate House at Balliol business park. It will now move its headquarters operations into a single building at Quorum early next year.
Greggs has signed a 10-year lease, and although the rent hasn’t been disclosed, it is understood that a figure close to current asking rent of £15.95 per sq ft was agreed. “There aren’t that many FTSE companies in the North East, so it was good to get one of them here,” says Fergus Trim, development director at Broadoak Asset Management, owner of Quorum. “A lot of companies are in growth mode and we have product that is ready to go. Plus, Newcastle is still good value compared with Manchester and other cities for companies considering north-shoring.”
It may seem premature to think about new development out of town, but if take-up continues at current levels, the next generation of buildings will be required within the next couple of years.
“It’s likely to take place around the airport,” predicts Cushman & Wakefield director Tony Hordon, “where several parties are looking at doing something, which may well come forward before the end of the year.”
The only speculative development that will be delivered on Tyneside outside Newcastle city centre this year is The Jesmond, which will provide 11,000 sq ft of grade-A space next to West Jesmond Metro station.
Rents will also have to race ahead significantly, local agents point out, if they are to reach the £25 per sq ft needed to make development appraisals stack up. “Contrast our situation in Newcastle with Leeds, where product is going up and rents make that viable,” says Sanderson Weatherall partner Robert Patterson.
