Let’s hold our nerve!

Mar 18 2008 by Steve Race, Evening Gazette

IN this, our first quarterly deals report for 2008, it is pleasing to report good levels of continuing development activity in our region.

We as a firm have been busy and have concluded a number of substantial transactions during the first quarter. Our own experience is that transactional property work remains busy and whilst certain transactions now take longer to conclude, the vast majority are proceeding and will proceed to completion.

In addition, many of our clients (particularly those with cash) say the current market conditions are an opportunity to secure both quality investments and development opportunities.

Alastair Darling’s first budget as Chancellor does not appear to have targeted the property industry too heavily, however the abolition of empty rates relief from April 1 is not welcome news for our development industry.

Obviously the proposed nationalisation of Northern Rock has had an impact on the underlying local confidence which our property industry requires and whilst there is undoubtedly considerable pressure on the Bank of England to reduce interest rates they appear to have adopted a “wait and see” attitude.

Economists are however confident that over the rest of the year there will be interest rate cuts rather than rises and this is something which will undoubtedly help stimulate business and confidence.

Economists are split as to what the outlook is for the global economy let alone the national and local economy over the following year and I am certainly no economist nor a crystal ball gazer. My impression is however that the underlying local property economy will perform well and that the financial institutions and bankers are still keen to invest in property. It is certainly true that they have tightened up their lending criteria, however perhaps this was a discipline that our market needed and continues to need.

Our region has weathered economic storms before. Fortunately, we are not, or certainly have not traditionally been, subject to the “boom and bust” cycle which has affected other regions in the UK, particularly the South-east.

The office market within Newcastle continues to remain strong with the continuing complaint that there is a shortage of high quality available space.

There are many developments which are planned, some have already started and the developers undertaking those schemes will be doing so in the full knowledge that those that have developed speculative office schemes over the last 10 years have generally been successful and been rewarded with prelets.

Our own move (in conjunction with Brewin Dolphin) to Time Central will take place in the next few months. On the adjoining site, Moonglade have commenced their redevelopment of the former Welbar House (now demolished) and this western part of the city will see a considerable amount of development activity over the next few years with Downings having recently announced a 100,000 sq ft prelet to Newcastle Business School on the former S&N site.

In Gateshead, Gateshead College moved into their new premises at Baltic Business Park in January and City & Northern’s development at Baltic Quays is progressing apace. All of these developments will certainly be the catalyst for the redevelopment of the surrounding areas in Gateshead.

The Tall Ships come to Hartlepool in 2010 and undoubtedly this event will be the stimulus for considerable development in and around Hartlepool Marina.

The London Olympic Games are now only four years away and 19 local sports venues have been confirmed as potential training camps for the 2012 Olympics and number Gateshead Stadium and Hartlepool Marina amongst them. It is to be hoped that the Olympics will have a positive effect on our local economy and that the significant benefits which are derived from such a huge event being held in the UK will not be confined purely to the South-east.

A huge national development programme will need to take place over the next four years and one of the concerns from the local construction industry is the potential drift of skilled local construction labour to the South-east.

Elsewhere in our region at Belmont in Durham, Mandale are pressing ahead with their redevelopment of the former L G Phillips site which will eventually provide in excess of half a million square feet of space.

In Sunderland, preferred developers have now been appointed for Sunderland arc’s developments at Farringdon Row and Holmeside Triangle. Whilst these developments will obviously take time to come to fruition they do reflect an underlying confidence in the long term economic future of our region.

Finally may I take this opportunity to pass on my thanks to all those surveyors who have supplied the information which has enabled me to compile the attached deals table.

Jonathan Combe is head of the property services group at Muckle LLP