City centre office demand slumps

Demand for office space in Newcastle has climbed 10% on last year, although the market for city centre spots remains depressed, new figures show.

In the first three quarters of the year, the take-up of office space reached 482,610 sq ft – a 10% increase on last year, according to a BNP Paribas report.

Newcastle’s out of town office market, featuring larger floor space and a broader selection of newer office accommodation, remained the most active market with total take-up of 342,345 sq ft recorded in the first three quarters of the year – 25% higher than in 2011.

However, at 140,265 sq ft, total city centre, take-up for the first nine months of 2012 was down 18% on the equivalent period a year earlier.

This is due to smaller deals sustaining the market, although there are signs of some larger enquiries beginning to come through, the report claims.

Aidan Baker, director of office agency at BNP Paribas Real Estate’s Newcastle office, commented: “The market has so far fared reasonably well during another tough year. Looking ahead, we predict that Q4 may be quieter than last year and the CC will face a challenge to match last year’s level of take-up.

"One key trend in 2012 is the increased proportion of grade A space acquired within the CC - some 25% higher than last year although this will be partly due to generous incentives making space more affordable.

“In relation to Newcastle’s headline rent, it remained unchanged in Q3 2012, at £20.00 per sq ft. CC incentive levels continue to remain favourable, with tenants currently negotiating three years rent-free on a straight 10 year term.

“For shorter five year leases, tenants are expecting to receive in the region of 12-18 months rent-free. At £16.95 per sq ft, the Newcastle OOT headline rent also remains unchanged,” added Baker