North East commercial space shortage could stall ‘Brexit Bounce’

Economy & Politics | North East | Property & Construction
Richard Turner, Partner and Head of Investment at Cushman & Wakefield in Newcastle
Richard Turner, Partner and Head of Investment at Cushman & Wakefield in Newcastle

The lack of commercial space in the North East could stall any manufacturing ‘Brexit Bounce’, according to Cushman & Wakefield.

The property services firm warned that an acute shortage of stock following a record year of take-up, in which over six million sq ft of industrial space was let, could have a detrimental effect if the manufacturing sector sees an upturn following a favourable Brexit solution.

Richard Turner, Partner and Head of Investment at Cushman & Wakefield in Newcastle said: “Following Amazon’s letting of 1.5 million sq ft in Darlington and 2 million sq ft in Durham for new fulfilment centres, the North East industrial market now has less space available than at any time in living memory with no grade A buildings above 50,000 sq ft. There are plenty of requirements in the market and some occupiers are being forced to look at tertiary buildings.”

In the investment market, investors are focusing their attention on ‘Beds (hotels, build to rent, student accommodation) Sheds and Alternatives’, with retail heavily out of favour.

Beyond the commercial shortage, Cushman & Wakefield highlighted the resilience of the sector and potential opportunities.

Patrick Scanlon, Head of UK Offices Insight at Cushman & Wakefield, said: “The impact of Brexit on UK financial services and real estate has been over-stated with fewer firms relocating staff into EU countries than had been forecast. The threat of trade wars and protectionism is likely to have a far greater impact on the real estate sector, although Brexit may cause short-term disruption.”

He continued: “As Brexit and other sources of uncertainty dominate the headlines, we can get fixated on the ‘here and now’ but real estate is a long-term game.

“Over the coming years, there are many non-cyclical trends that will create opportunities for investors and occupiers who stay ahead of the curve. These trends will be in place regardless of global trade volumes, Brexit or any other external force.”

These opportunities include the next generation of tenants, the rise of Coworking and Alternative real estate, such as healthcare and student living, which accounted for an all-time high of 32% of regional investment volumes in 2018.

Patrick concluded: “Markets that have strong fundamentals will stay popular with core investors. Meanwhile, the more challenged parts of the market will see pricing drift until they look good value for opportunistic investors looking to redevelop and repurpose assets. There is plenty of capital looking for these opportunities.”

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