Demand is steady for office lettings in region; LETTINGS.
OFFICE lettings in the region have continued at a steady pace over the second quarter of the year despite companies' concerns about the UK's lack of economic growth.
While activity in the offices sector continues though at a moderate pace with take-up at 47,833 sq ft for the second quarter market up on quarter 1, Knight Frank reports that take-up is still "significantly lower than the longterm average".
Patrick Matheson, associate, office agency, Knight Frank's Newcastle office says in the firm's Regional Office Market Presentation report (ROMP) that prime headline rents remained unchanged on Q1 at pounds 21.50 per sq ft and net effective rents were also stable at pounds 17.50 per sq ft - down from pounds 23 in mid-2010.
Availability of office space continues to decline, with the amount of available new and Grade A space in the City Centre falling to 274,187 sq ft - down by 24% on June 2011, although the Q2 vacancy rate was unchanged at 8%.
Active named requirements for Newcastle city centre declined sharply in Q2 to 95,000 sq ft, driven by the significant fall in larger foot loose enquiries. The average size of deal is estimated to be just 3,400 sq ft.
Matheson said: "There were a total of 14 deals completed in Q2 in the city centre. The largest deal was the letting of 8,461sq ft at St James Gate to Scott Logic.
"Other notable lettings included Technip Offshore's acquisition of 7,581 sq ft at Baltic Place and Pertemps' 4,448 sq ft deal at No 2 Cathedral Square.
"Occupiers are expected to remain cautious about expansion, given the continuing concerns over the wider economy and the Eurozone crisis. With enquiry levels down significantly during Q2, we expect take-up to remain relatively thin in the next six months."
"With the difficulty developers are facing to secure funding for speculative development, combined with weaker occupier demand and availability, the vacancy rate is expected to remain broadly at its current level over the coming months."
The ROMP report also reveals that limited investment activity was reported in Q2, reflecting a combination of subdued investor sentiment and a shortage of buying opportunities.
"The lack of high quality available space across the regional market, par-ticularly in prime areas, is slowly leading to deals hardening," said Matheson.
"There is no doubt that it still remains an 'occupiers market' with heavily incentivised deals on offer. We do still remain optimistic as demand has continued to remain stable over the first half of the year."
AT THE HELM Patrick Matheson from Knight Frank