Sought-after schemes fill gap

Apr 23 2008 By Andrew Mernin

Shortage of top offices bound to drive up rents

The Newcastle office market continues to perform well, despite other sectors struggling in the current economic climate, says Neil Osborne.

THE city centre office market remains strong, with virtually no new product currently available.

Where accommodation has been sitting empty – at St James’ Gate and City Quadrant, most is now either under offer or let and the only new space coming on stream in 2008 is Mandale’s West One at Forth Banks, which extends to 44,500sqft on four floors.

This will be completed by the end of May and provides grade A space with floorplates of about 11,500sqft. Looking further ahead, New Wellbar House, a 100,000sqft project, is now on site but will not be available until the end of 2009 and likewise Haymarket Hub – the redevelopment of the Haymarket Metro station – will also be available by autumn 2009.

Here, 28,000sqft on three floors and a mezzanine is available and it has access from Haymarket Metro station.

The recent pre-letting of 100,000sqft to Newcastle University Business School at Downing Plaza is Newcastle’s largest office pre-let and a sign that the market remains strong. Storeys:ssp acted for Downing and DTZ for the university.

The agreement for lease was signed at a rent of £20.50 per sqft. and it is expected the accommodation will be available to the university for 2010.

A further building of 75,000sqft is planned at Downing Plaza and there is strong interest from several parties. There remains a healthy demand in the city with two 100,000sqft inquiries currently unsatisfied.

There is a limited choice for requirements of this size, although that choice does include schemes such as Hanro’s Strawberry Place, which has consent but which the developers say they will not start without a pre-let.

Also about to begin is 44 Westgate, Centreland’s redevelopment of the former Westgate House, which will extend to 65,000sqft but which will not be completed until 2010.

With the continuing shortage of supply there is bound to be upward pressure on rents. The situation is accentuated by increasing construction costs and it is inevitable rents will rise – probably towards £24 per sqft in the next two years.

Neil Osborne is a director of storeys:SSP in Newcastle.

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