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News Release

London

Office leasing activity in Newcastle holds its own during first half of 2009


London, 30th October 2009 - Relative to its size, Newcastle’s office market (city centre and out-of–town) saw more leasing activity during the first half of 2009 than any other major regional UK centre, according to research by Jones Lang LaSalle.

Whilst take-up volumes in the UK’s five major regional centres (Birmingham, Edinburgh, Glasgow, Leeds and Manchester) have been dampened by the recession, each market saw between 1.0% - 1.4% of total existing office stock leased over the first six months of the year, however Newcastle reached a higher level of 1.8%.

Chris Hiatt, chairman of Jones Lang LaSalle’s National Office Agency team, said: “Take-up in Newcastle over the first half of this year was driven by two deals on out-of-town business parks. Convergys and North Tyneside Council, who both signed for around 50,000 sq ft and 40,000 sq ft at Quorum and Cobalt Business Park, respectively.  We also saw the acquisition by EAGA of Northern Rock’s 120,000 sq ft offices in Gosforth as well as the purchase by Npower of Northern Rock’s other new build office, 220,000 sq ft at Rainton Bridge in Sunderland.”

Whilst occupiers have proved slower to commit to office space, which will keep take-up volumes subdued this year, unsurprisingly, the public sector has proved more stable than the financial sector and was a key driver of city centre leasing activity in the first half of 2009; accounting for 25% of take-up. However, with significant cuts in public spending likely over the coming year, Jones Lang LaSalle anticipates this will in turn bring a degree of downside risk to Newcastle’s office market.

However, as an established administrative centre for the North East, Newcastle should be able to take advantage of a clustering effect. In particular, an existing requirement by the Department for Works and Pensions has identified Newcastle as a potential location for a 60-100,000 sq ft call centre facility.

Jones Lang LaSalle anticipates that occupier demand from the financial sector, (one of the primary office employers in Newcastle along with public sector), could fluctuate over the coming months as financial services firms continue to undergo significant change driven by bank collapse, bank consolidation and significant reductions in headcount.
“The recent letting of 102,000 sq ft to Tesco Bank at Quorum Business Park is a good example of how changes within the banking sector may benefit Newcastle overall as firms move their business functions from higher cost locations”, added Chris Hiatt.

Chris Hiatt continued: “Looking ahead, the Greater Newcastle office market is in an advantageous position to attract potential occupiers from the financial sector in that its net effective rent currently operates at a discount of 23% compared with Leeds and 12% compared with Manchester.”
He concluded: “Grade A supply in the city centre is tight with Baltic Place the only significant city central office scheme to be completed this year in Newcastle Gateshead.  We expect the supply pipeline to remain limited over the next 18 months. There is still significant demand for city centre occupiers and with recent deals to Tesco and NEPIA, plus a number of large scale office requirements in the market, we anticipate activity in the second half of this year to be similar to first six months of 2009.”