We need more space in central locations

May 14 2008 by Graeme King, The Journal

Optimism about the Sunderland city centre office market is not shared by all. Chris Pearson believes occupiers are inevitably moving out of the central core area due to a very limited supply of space.

WHERE there has been regeneration, such as at Wylam Wharf on the southern bank of the River Wear near Wearmouth Bridge, office lettings have been successful but otherwise for central Sunderland there is a critically low supply of space with very little on the way.

As a result, in a similar way to decantation of central Middlesbrough to Teesdale Business Park, those with a need to be in Sunderland are being forced to look at locations such as Boldon and Monkton, both out-of-town but with a clear advantage of being A19 locations.

The question is how has this situation arisen? In my judgement the focus has been rightly on getting the large space users into the boundary of Sunderland. Large space occupiers equal jobs, as demonstrated by Doxford International Business Park. But this focus has been to deny small and medium space users suitable accommodation in central Sunderland which, as a result, remains largely a retail centre. Not only is this frustrating occupiers but it is keeping rents at a figure just below £10 per sqft. This is not enough to encourage new development of Grade A space where the figure must be nearer £15 per sqft so developers with planning permission are hesitating..

The result of this vicious circle is that developers such as Gladman are taking up demand at its Monkton Business Park where my firm and Knight Frank are offering 2,000sqft to 25,000sqft units for sale off £155 per sqft or to rent from £13.50 per sqft.

Doxford International, developed with the benefit of Enterprise Zone status, currently has a 110,000sqft letting to Northern Rock which has committed itself to 400,000sqft in two phases at nearby Rainton Bridge. But with consultation ongoing on the need to reduce Northern Rock’s staff by 2,000 jobs, it is unclear what impact this will have on the city’s out-of-town office market.

Chris Pearson is a partner at Gavin Black & Partners