Much needed city centre office space in the heart of the city
Our recent Big Nine report indicated that the regional offices market is well placed to weather the Covid-19 impacts. The completion of the Lumen office building extending to 106, 000 sq. ft. is timely, and will bring forward a significant contribution to the dwindling supply of Grade A office stock within Newcastle’s city centre. Schemes like this offer significantly more choice to office occupiers, providing opportunities for north-shoring and inward investment companies. They also readdress the balance with the dominant out-of-town market in Newcastle.
In addition, the building central to the Newcastle market fills a void within the development pipeline and provides the opportunity for potential occupiers to view high specification office space. The activity in terms of potential new pre-lettings during the construction phase has been beyond all expectations which will in due course lead to early announcements of take up by strong regional covenants. The availability of the office space will accommodate both existing and latent demand from both public and corporate companies.
Tenants are attracted to the academic, innovative and tech community on Newcastle Helix, offering strong links to Newcastle University and other leading institutions.
The location within the city centre is ideal in terms of public access and transport facilities, being close to the Metro, the hub of regional bus services and the national rail network.
The Lumen is a sustainable building with green credentials, offering flexible floorplates with good natural lighting, cycle storage, changing facilities and showers for staff – all aspects of employee wellbeing that is a driver for employers.
As the property agents for The Lumen we are not surprised that we have seen considerable interest in this much needed building in the heart of our city centre.
Additional Market Commentary
At the beginning of 2020, research by Avison Young in their Big Nine regional office markets research report showed that the regions were very well placed, with low vacancy, a number of large requirements and significant pent-up demand. There is more sectoral diversity in the regional markets than there has ever been, and this has been further enhanced by inward investment through companies from the South East looking to mitigate costs and the Government’s Regional Hub developments.
With vacancy levels at their lowest in fifteen years, the regional markets should be well placed to weather the storm.
Nevertheless, the strong fundamentals in many of the markets will likely provide an element of resilience during the current pandemic. Vacancy rates are low and half of the current stock under construction is pre-let. There was a broad mix of sectoral activity in Q1 2020 particularly from the TMT sector, professional & financial services, manufacturing and public services.
Whilst Q1 activity was indicative of strong positive sentiment at the beginning of the year, activity is expected to be significantly down over the next months. The lockdown is not only creating uncertainty around pricing and occupational requirements but significant practical difficulties. Viewings and due diligence could not be carried out and material for construction sites and fit outs have been delayed. However, several deals are progressing regardless, including large pre-let deals, while others are taking a ‘wait and see’ approach.
Total take up in the Newcastle office market achieved 197,500sq.ft.for the first quarter of 2020, 18% up on the ten year average. The out-of-town market dominated Q1 accounting for 163,000sq.ft.or 82% of take up.
Q1 take up and advanced deals in the Newcastle pipeline are encouraging. There are a number of well advanced deals in solicitor’s hands within both the city centre and out of town markets. Most are expected to complete, particularly where existing buildings have to be vacated. However less advanced deals and recent enquiries will be slowed down, with viewings and fit outs having been unable to be carried out. This situation has been resolved as a result of the latest government announcements re return to work and ability to carry out site visits and inspections