Office take-up booms in Newcastle
H1 figures for office take-up across the big nine regional cities show Newcastle outperformed the 10-year average by 37%, driven by prelets at HMRC’s base and Pilgrim Place.
This was the highest percentage of all the nine cities monitored, followed by Manchester (27%) and Bristol (21%).
Across the nine cities of Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle, Avison Young recorded the largest H1 office take-up since pre-Covid in 2019, reaching 3.7m sq ft – 6% ahead of the 10-year average.
Q2 was slightly quiet, with 1.6m sq ft of lettings, representing a 26% drop on the first quarter.
The office market in Newcastle also enjoyed its strongest start to the year since 2019, with 481,000 sq ft let across the city.
This pipeline was dominated by pre-let offices in the 463,000 sq ft HMRC’s mega-base, being constructed by Bowmer & Kirkland and due to complete later this year, and 1 Pilgrim Place, which will have 250,000 sq ft of space available from 2027.
It is being constructed by Bowmer + Kirkland, as is an underground 132-space car park and service area, and has already secured a 170,000 sq ft pre-letting from the Department for Work and Pensions.
The biggest deal of Q2 for Newcastle was out of town, where education provider UKMC let 47,000 sq ft at North of England House in Doxford.
This bucks a national trend, which is seeing the out-of-town market continuing to gain momentum due to a lack of grade A space with large floorplates in city centres.
Six of the 10 largest deals across the cities have been out-of-town, a turnaround from last year where all top 10 deals took place within city centres.
Across the nine regional markets, prime rental growth rose quarterly by 0.9%, driven by prime rents hitting £45.50/sq ft in Birmingham and £49 in Bristol, representing quarterly rental growth of 5.2% and 2.1%, respectively.
Prime rent for Newcastle currently sits at around £32/sq ft.
Paul Broad, principal and managing director, national offices at Avison Young, said: “The first half of the year has been transformational for the Big Nine office markets.
“The strength of activity reflects the levels of pent-up demand from occupiers. We’re really starting to see out-of-town markets, where larger, flexible floorplates are available, benefit from city centre supply constraints.
“Whilst overall activity decreased slightly in Q2, the year so far gives us confidence that demand will remain high for future-proofed, sustainable buildings that support evolving workforce needs.”
