‘Little sister’ is growing up

Mar 19 2008 by Tony Hordon DTZ Offices & Development Director, The Journal

GATESHEAD has been regarded as the “poor relation” or “little sister” to Newcastle in the past, but now the town has turned a huge corner with a number of schemes currently under construction and nearing completion.

When considering north of the river and the dearth of development activity, this is somewhat impressive.

You could argue it is Gateshead which has been instrumental in the growth the region has witnessed over the past three or four years, particularly with the completion of icons such as Gateshead Millennium Bridge, The Sage Gateshead and Baltic.

There is no doubt that this area will represent a new commercial quarter for our region for years to come, comparable (albeit on a different scale) to how the South Bank in London has flourished and developed over the years.

South London now boasts some major occupiers, who have been attracted from the traditional Square Mile, the home of the city’s banking and finance district, north of the River Thames. The occupiers have been attracted simply by good urban design and it is on this basis which Gateshead will also follow suit with some stunning schemes shortly to arrive.

My firm is involved with four of the larger schemes in Gateshead, namely the Point, a development by UK Land Estates; Baltic Place, a development by the joint venture partnership of City & Northern and the Robertson Group; Baltic Business Quarter, a development by Terrace Hill and the forthcoming GQ2, by Kier.

With schemes completing this year, together with the current supply and demand dynamics in the North East, the signs are very encouraging to support further rental growth off our current headline rent of £22 per sq ft.

There is no doubt that Gateshead could support these rents given the quality of the product which is to be delivered.

It is important to recognise two factors when considering headline rents, emanating from both the developer and occupier sides. Developers have, over the last 12 to 18 months, witnessed a huge increase in construction costs.

In an effort to ensure that schemes are viable, and perhaps more importantly to ensure the quality is commensurate with an occupier’s needs, rents will need to increase.

From an occupier point of view it is also important to recognise that while rents have increased it still represents a small proportion of overall costs.

Staff represent something in the region of 85% of an operator’s costs and therefore accommodation plays a small part on the financial side.

A recent MORI research poll for the Commission of Architecture and Build Environment showed an overwhelming 81% of those questioned said that they were interested in how a building looks and feels.

Both north and south banks of London fuse together, which make London what it is in terms of its diversity and character. The real catalyst for growth and continued success here will be that both sides of the river work as one, delivering one vision for the whole of the region.

Little sister looks like she is stealing a march and could be in the spotlight in terms of commercial activity for the foreseeable future.

Little sister seems to be stealing a march and could be in the spotlight for the foreseeable future.

Page two: Priestley would be impressed