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NORTHEAST PROPERTY NEWS

Wednesday February 5 2020

Developing Consensus says North East property sector is in positive mood


Given the national and global issues at the time of the first Developing Consensus commercial property market survey carried out last December, average sentiment scores as a forecast for 2020 across the offices sector at 59% and industrials at 63% are positive.



Developing Consensus says North East property sector is in positive mood

Given the national and global issues at the time of the first Developing Consensus commercial property market survey carried out last December, average ‘sentiment’ scores as a forecast for 2020 across the offices sector at 59% and industrials at 63% are positive.

Based on interviews with Cushman & Wakefield, Avison Young, Savills, Naylors Gavin Black, Bradley Hall and HTA Real Estate, overall sentiment showed industrials marginally ahead of offices though the forecast for 2020 could see a slight reversal in sentiment between these two key sectors.

There is significant office development going forward which shows Local Authority support for development has been beneficial with a good example being the Riga building at the Baltic Quarter, Gateshead. 

The Lumen building, now close to completion at Newcastle Helix, as with the Riga building, is attracting strong interest though occupiers are taking longer to make decisions and the current political landscape is making things difficult.

The industrial sector is faced with a lack of stock. The market has been boosted by two very large retail sheds in Darlington and near Durham City but again the market is being affected by the political landscape. The fundamentals are strong but some parts of the region are heavily reliant on Nissan and its large supply chain, presently an area of uncertainty.

Investment is seeing more deals off market and less on the open market. Overseas investors with currency benefits are being attracted. The sector is waiting for the outcome of Brexit and the UK political machinations to settle. Issues abroad such as USA/China trade ‘war’ and Middle East conflicts add to the uncertainty. The fundamentals are good but very few Institutions are placing money.

Retail is faced with continued growth of online sales. In the right locations there is still demand but the traditional High Street faces issues. It’s a challenging place to be, an almost demise of the High Street scenario. High Streets need to be more destination-focused. The key issue is how to repurpose existing buildings. It’s going to be a bumpy road ahead and some tightening of belts will be required.   

Despite the well documented national and international challenges, on-site activity continues at Newcastle Helix. Large-scale enabling works are in progress across the site ready to bring forward further commercial buildings as well as the residential element to complete the 24-acre landmark scheme.

Elsewhere major activity includes the aforementioned Riga building, Gateshead, The Vaux, Sunderland, Central Square, Middlesbrough and Milburngate, Durham City. 

On site in 2020 will be Taras Properties 120,000 sq ft Bank House development so at last Newcastle will get the supply of new Grade A office space it needs. Development continues at the Stephenson Quarter and the planning decision in respect of the St James’ Metro site is awaited.

It is this high quality development that will retain talent in the region. By creating high quality working environments with staff well-being upper most, retention of graduates will be easier. Newcastle will be a superior alternative to working in central London.

As always the North East does not fare as well as it should. Over the next five to 10 years the region will be more attractive to digital companies due to our better lifestyle and Newcastle’s Smart City status. The message focus should be the North East is a better place in which to live and work.

The market takes comfort from requirements presently in the market place, possibly as much as 500,000 sq ft covering both public and private sectors.

For industrials there is very little stock so values are holding up. As to investment and which sector will be the strongest in 2020 the answer is it will be between city centre offices and prime industrials. It really depends on where the economy is heading. Yields could still be keener in a low interest rate environment.

Presently the £ is low which is attracting foreign investors but will this remain to be the case post Brexit? Looking specifically at the North East there is still value with potential for higher returns.

The industrial market will still benefit from ecommerce with last mile delivery now almost a separate sector. The only thing holding the market back is a lack of product. Shortage of supply suggests there is still room for rental growth. Demand from SMEs is robust but decision-making can be slow. Hot spots continue to be Team Valley, Gateshead, Cramlington and the International Advanced Manufacturing Park, Sunderland.

Issues potentially impacting on the comprop sector include Clean Air initiatives which are still in the gestation phase. The concern is the impact on Newcastle’s city centre if it’s both costly and difficult to access by car. This will be particularly challenging for a retail sector that is already under pressure.

Developing Consensus is a membership organisation based in the North East, that works together to create a more prosperous economy.

Built-up of North East businesses and national organisations operating within the region, we work to make the area more attractive to investors and to provide the right conditions for growth whilst delivering the goals of the North East Strategic Economic Plan.

From professional services, finance and the construction industry to local authorities, strategic boards and regional membership organisations, collaboration is crucial for us to tackle barriers preventing growth and encourage progress in the five key areas of Regional Vision, Planning, Inward Investment, Enabling Development and Infrastructure.

 

 



"There is significant office development going forward which shows Local Authority support for development has been beneficial."
Written by Chris Dobson








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