Office business eases back

The office sector has seen the lowest level of take-up in a quarter for two years in Newcastle city centre with just five deals over the three month, fourth quarter, period at an average of only 2,500 sq ft.

Total city centre take-up for the year at 154,177sq ft was a 20% reduction on 2011 though out-of-town letting activity at 578,087 sq ft was marginally higher than 2011.

The research is based on combined feedback from leading office agents namely BNP Paribas Real Estate, DTZ, Gavin Black & Partners, GVA, Jones Lang LaSalle, Knight Frank, Lambert Smith Hampton, Naylors Chartered Surveyors, Sanderson Weatherall and Storeys Edward Symmons.

Chris Pearson, offices partner at Gavin Black & Partners, says figures for city centre take-up are clearly low “but taking everything into account – the recession, occupier uncertainty, city centre under supply and out of town over supply - it wasn’t surprising.

“The low average size of office lettings in the city centre continues the trend for smaller lettings driven by activity across the board from small and medium sized businesses that can make local decisions. There is clearly economic activity in the size-band of up to around 5,000sq ft, which is encouraging.”

Aidan Baker, offices director at BNP Paribas Real Estate, says it’s a good time to seek office space.

“For occupiers there is a good spread of incentives ranging from significant rent free periods to lower rents to shorter, more flexible, leases and so on. This is especially noticeable in demand for quality refurbished space to serviced office accommodation.

“However the city centre has seen a recent letting at a headline of £21.50 psf so while rents are under pressure the lack of supply of new, Grade A, space is acting as a balancing effect – with a shortage of Grade A supply meaning headline rents are relatively stable and incentives are likely to decrease as further space is acquired,” he adds.

“The city centre development pipeline is almost without product bar Silverlink’s start on site at its Stephenson Quarter scheme that will bring forward an initial 35,000sq ft of grade A space. That’s the only start on site in 2013 in Newcastle city centre as regards to new space."