March 11 2019 @ 11:57 by Richard Dawson
Overseas investment in Newcastle offices has more than doubled in the last 12 months, and office take-up has reached its highest level in three years, reveals a new report.
Knight Frank’s UK Cities Annual Office Review shows take-up of Newcastle’s offices increased by 33% in 2018, reaching 236,928 sq. ft. which is a notable 14% above the 10-year average. This is in sharp contrast to 2017, when office take-up in Newcastle fell by 19%.
The biggest deal in 2018 was 63,350 sq. ft. lease to HMCTS at the Civic Centre which is the first part of a £1bn reform of courts and tribunals. Other major deals included Newcastle University acquiring the 14,906 sq. ft. freehold of Great North House and a 13,606 sq. ft. lease at Northumberland House.
On the property investment front, total volumes improved in 2018, increasing by 10% on last year. Domestic investment remained strong – accounting for 58% of volumes – and overseas money invested in Newcastle offices shot-up to 27% – from 11% in 2017.
The purchase of the St Nicholas Building by MC Thematic Growth Fund for £19.3m was the largest office sale in 2018, followed by the £10m sale of Rotterdam House to overseas investor UKRO.
Partner and office head at Knight Frank, Peter Bowden, said: “Despite the overarching uncertainty in the economy, there is still a healthy level of demand in the Newcastle office market – particularly in the smaller size ranges and we expect this to continue through 2019.
“The main issue will be the continued lack of Grade A stock available, with only Lumen at Helix due to bring new space into the market this year.
“With a new headline rent of £24.50 achieved in 2018, we expect rents to increase further in 2019, creating a stronger case for future speculative development.”
Knight Frank partners, Dougie Cranston and Paddy Matheson are in Cannes this month at property market event, MIPIM, to spread the word about the exciting opportunities within the North East property market.
Partner in the Capital Markets team, Dougie Cranston, said: “Record numbers of foreign investors are targeting North East England because they can typically achieve 50 – 100 bps added value by investing here, compared to other UK regions.”
To see the Knight Frank UK Cities Annual Office Review in full go to www.knightfrank.com