Will Newcastle be left behind without a devolution deal for the North East? “Devolution is as important for the North East as Brexit is for the country,” Adam Serfontein, managing director of Newcastle-based property investment and development company Hanro Group told the audience at EG’s Newcastle Question Time.
“Im uncertain whether a metro mayor is important of not, but it’s the price of entry to actually get a bigger seat at the table for central government when asking for funds. And it’s quite clear that until and unless Newcastle, North Tyneside and Northumberland pull off their devo deal which we must all support… we won’t get our fair share of regional growth fund and we won’t get a bigger seat at central government when we’re asking for major investment in infrastructure, transport, ports and airport.”
The region has twice been offered a devolution deal, only for it to fail to get enough support. Most recently, in September, local councils rejected the deal for extra powers (and £1bn that came with it) by three votes to four. Without a devolution deal, the region is expected to be less well-favoured than areas with them. In January, the North East received one of the lowest local growth fund allocations at £25.50 per head – just over half of that awarded to Manchester and Liverpool.
The panel
Pat Ritchie chief executive, Newcastle City Council
Ben Rodgers senior development manager, Legal & General Investment Management Real Assets
Richard Wise partner, Ryder Architecture
Adam Serfontein managing director, Hanro Group
Robert Patterson partner, Sanderson Weatherall
Pat Ritchie, chief executive of Newcastle City Council, says it remains committed to negotiating a devolution deal with central government, to get the funding which would help kickstart more development. “The council has done a lot of work with the private sector to de-risk sites,” she says.
“A significant investment fund that would come with devolution would allow us to do that and recycle it to create value and further invest in the region, and I think that’s got to be something worth pursuing.”
Richard Wise, partner, Ryder Architecture, would like to see a more unified local government stance on devolution. “I think the key thing for the region is that they should put any of their petty grievances and differences aside because of the greater good of our region,” he says.
Investor’s perspective
However, Ben Rodgers, senior development manager, Legal & General Investment Management–Real Assets, which is partnering with the council to develop the 24-acre office and residential scheme at Science Central, plays down the importance of having a devolution deal from an investor’s perspective. “In a certain sense, there’s a financial self-governance that gives more flexibility to certain types of projects,” he says. “But I think, in our experience so far, we’ve certainly not turned any opportunity down because it’s not been with a devolved authority.”
Robert Patterson, partner at Sanderson Weatherall’s Newcastle office, says the region needs to clean up its inward investment act. “People from outside the region and abroad don’t see us as a cluster of seven local authorities, they come here and see one urban conurbation or one North East, so we need to get our inward investment act right going forward, getting straight into the marketplace with that confidence we have from a single point of contact.”
After the general election, the region will be first in line to sign a deal. Otherwise, it risks losing out.
Making the A-grade
Photographs: Tony Hall
Biggest opportunity in the region? City centre grade A-office development, says Adam Serfontein, managing director of Hanro Group, the Newcastle-based investment and development group.
“The biggest opportunity at the moment will be for investors and developers, who are investing their own cash in good grade-A offices and are prepared to let on flexible terms.
“Because, if you are holding out for a 10-15 year lease nowadays, it’s very tricky. If you have the confidence to except shorter term leases in return for premium rent, they will be rewarded with an increase in demand.
“Headline rents are about £23 per sq ft, but what’s more important is that incentives are coming down dramatically and have reduced over the course of the past 12-18 months.
“I think the confidence that Legal & General’s commitment [at Science Central] will give other new entrants to the market is very important to us. And in Newcastle city centre there’s never been more than 18 months supply available at any one time. There is a shortage, and I think those who have the commitment and the confidence to invest at this stage will be rewarded. It’s all about risk and reward and now’s the time to do it if you can.”]
Newcastle office take-up Q1
Total Newcastle office market take-up for Q1 2017, including out of town take-up, stood at 210,502 sq ft, which reflected a circa 63% increase on the previous quarter, according to Sanderson Weatherall. In the city centre there were eight deals with a total take-up of 33,461 sq. ft, broadly similar to Q1 2016k with the most significant letting being Frank Recruitment Group acquiring 19,200 sq ft at Laidlaw Estates’ St Nicholas Building. In the out of town market take up was over double the previous quarter at 177,041 sq. ft across 39 transactions, including Durham Police taking 33,600 sq. ft at Doxford Business Park and Barratt Homes signing for 20,000 sq. ft at Metro Riverside. Prime rents stood at £22.50 per sq ft with prime yields at 5.9%.
