Following last year’s launch of Avison Young’s Ten Trends for a Zero Carbon World and the 2022 Forecast National Outlook, the strategic real estate advisor has launched its 2022 Forecast UK Cities report for Newcastle. The 2022 Forecast was delivered virtually to a 100+ audience of clients and professionals within the property / development sectors and representatives from a broad range of public sector bodies.
The presentation by Daryl Perry, UK Head of Insight, Avison Young demonstrated some real positives for Newcastle and the greater North East Region in 2022, built on some tremendous performance in recent years. The Newcastle report is one of a series of UK wide reports providing perspective on how wider events, trends and indicators will impact real estate in a variety of sectors across the UK’s Big Nine cities.
A panel discussion followed the presentation, chaired by Gordon Hewling, Principal and Managing Director, Avison Young, Newcastle. It included Stephen Patterson, Chief Executive of NE1, Jen Hartley, Director of Invest Newcastle, Mark Thompson, Managing Director, Ryder Architecture and Simon Beanland, Principal, Investment, Avison Young, Newcastle
In summary, the forecast 2022 shows there are reasons to be cheerful across the whole of the North East region, from the Tees Valley in the south of the region, to Durham, Sunderland, Gateshead, Newcastle and Northumberland. The area has seen an incredible amount of activity across the region in the last 12 months, much of which bodes well for 2002 and beyond, with a number of substantial, long term projects in the pipeline.
The Saudi takeover of Newcastle United and HMRC’s commitment to the city during the latter part of 2021 are two big fillips for the city and its international profile. The office market is coming off the back of its most successful year of lettings on record – with HMRC and Just Eat committing to approximately 650,000 sq ft between them. Treasury North in Darlington is planned to hold 750 civil servants as part of the Government’s plans to move 22,000 civil servants out of London by the end of the decade.
Newcastle has an oversupply of retail space, with much of the repurposing still to happen. The rate of rental falls will continue to slow as the market finds its bottom.
House price growth in Newcastle underperformed the wider UK in 2021 but was still very strong relative to pre-pandemic levels, rising 7.5%, compared to 9.7% across the wider North East.
The city continues its bounce back post-pandemic. 2022 is forecast to see the economy grow by 6.2%, well above the pre-covid average of 2.1% per annum. Moreover, we expect North East England to continue to grow as a leading centre for the Green industrial revolution.
Sunderland City Council is continuing to deliver on its 20year masterplan with early delivery of infrastructure and progress of key sites such as Vaux. To date the former brewery site has seen the development of The Beam and the Council taking possession of the landmark City Hall. To develop further space in the city the Council are working in partnership with Legal & General and Landid to bring forward an additional 200,000 sq ft of commercial development.
Newcastle has an oversupply of retail space, with vacancy as high as 27%, and we expect to see a further repositioning of the stock both in the city and nearby during the course of the year.
The industrial market continues to benefit, as much of the country has, from strong demand. Take-up was c.30% higher year on year, with Amazon’s commitment to the region driving much of this.
Strong demand has driven prime rental growth upwards, with significant increases over the last 18 months – with growth forecast to continue into 2022. This is driving an increase in appetite for speculative development, with L&G building 600,000 sq ft at Hillthorn Park and 165,000 sq ft coming through at Turbine Business Park – which will be privately funded.
Gordon Hewling, Managing Director of Avison Young, Newcastle said:
“2021 was proof that we can adapt to new ways of working and will continue to adapt as our world evolves. We enter 2022 with a huge focus on ESG, which presents opportunities and new ways of thinking about how real estate can be better leveraged to benefit our economy, communities and the environment.”
Daryl Perry, UK Head of Insight at Avison Young, said:
“Last year was proof that, despite ongoing challenges, our cities can and will continue to evolve as our world changes. Despite some headwinds to their economic recovery in the short term, we are seeing our cities regain their status as the common ground where we come together to work, live and play.”