April 26, 2018 @ 15:49 by Chloe Holmes
Lambert Smith Hampton (LSH), acting on behalf of UKRO, a Jersey-based UK regional office fund, has acquired the 35,686 sq ft Rotterdam House, Quayside, Newcastle upon Tyne for £10.1m reflecting a net initial yield of 6.43%. UKRO was represented by Adapt working in conjunction with Ship Street Advisors. The vendor was a German private investor.
“We have seen some keen yields on Quayside and the UKRO deal suggests the demand for well let buildings in prime Newcastle locations continues,” says Luke Symonds, Capital Markets, LSH.
Michael Downey, Senior Surveyor, Office Agency, LSH agrees that sentiment in the market is sending out ‘positive messages’. He says: “Although take-up is down 3% year-on-year, there continues to be a strong level of enquiries and there are positive messages coming out of the market heading into the second quarter”.
‘’Furthermore, there have been several prime city centre transactions which consolidate the £23.50 per sq ft headline rent set in the previous quarter. The picture is equally positive in the out-of-town market, with a notable increase in the number of transactions for space upwards of 5,000 sq ft.” says Mr Downey.
Richard Turner, Investment Partner at Cushman &Wakefield, says: ‘Having forward funded this building on behalf of our clients in 1999 and asset managed it in the interim, it is fitting to have completed the journey with a successful sale. Office investments in Newcastle enjoy an enviable combination of strong rental yield and continuing rental growth and hence we have seen a resurgence of investor appetite, especially for the well located modern buildings such as Rotterdam House.’
City Centre Grade A office supply continues to tighten and is expected to fall below 100,000 sq ft by the end of this year. Consequently, occupiers seeking substantial amounts of grade A office space will be faced with limited options.
“The shortage of grade A space in Newcastle city centre has had an upward effect on rental growth and squeezed incentives on primary and secondary stock, with headline rents expected to rise from £23.50 per sq ft to £24.00 per sq ft by the end of this year. Out-of-town, prime rents are set to remain stable at £16.50 per sq ft,” adds Mr Downey.
Separately LSH has been instructed to bring the former Wolsingham Steelworks, Durham Road, Wolsingham, to the market. The 13.70 Acres (5.54 Ha) is a major strategic development opportunity.