Newcastle office rents soar as tenants seek ESG assurance
BNP Paribas Real Estate has released its market report for Q4 2023, the research revealing that prime office rents have climbed as occupiers demand amenity-rich spaces and sustainable buildings.
According to the Q4 2023 figures released by the consultancy:
- Newcastle prime office rents reached £32 per sq ft as of Q4 2023, which is +14.3% year-on-year and is almost double the average regional growth of 7.2% year-on-year across the top 10 regional city centres
- In terms of prime rental growth vs Q4 2019 [pre-pandemic levels], Newcastle has reported +28% growth, the highest of the top 10 regional city markets, albeit this is off the back of a relatively lower base compared with the Big Six markets
- Newcastle city centre take-up in 2023 totalled 207,078 sq ft across 39 deals compared to 224,332 sq ft across 45 deals in 2022. Despite the decline, this level of take-up is ahead of the 5-year average of 185,000 sq ft
- Further evidencing the flight to quality push, Grade A city centre take-up accounted for 71% of the 2023 total
Aidan Baker, head of the Newcastle office at BNP Paribas Real Estate, said: “The Newcastle office landscape is shifting with occupiers coming through from a multitude of sectors including tech, consultancy and professional services.
“These tenants are actively upgrading and seeking out the top spec spaces, which are well located and meet their ESG expectations. This is driving rents at the prime end of the market.
“Lack of supply is an ongoing issue which needs to be addressed, either through new stock or retrofitting, especially in light of this rising occupier demand. They are either located in the city centre or actively looking to move back. Improving supply could help to facilitate local jobs and ensure continued economic growth of the city.”
Two refurbishment schemes that will go some way to redressing the lack of supply, said Baker, are the revamps of One Trinity Gardens and East Quay 5, bringing 75,000 sq ft and 35,000 sq ft respectively to the market. Both are cued up for a start onsite.
Elsewhere, office take-up for the wider Tyne & Wear market totalled 383,186 sq ft in 2023 compared with 465,438 sq ft in 2022 and 581,262 sq ft in 2021. Q4 totalled 97,073 sq ft across 13 transactions, compared with 58,273 sq ft in Q3, 103,553 sq ft in Q2 and 124,287 sq ft in Q1 2023.