Newcastle: a North Eastern Powerhouse
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UK Cross Sector – Spring 2019 SPOTLIGHT Newcastle: A north Savills Research eastern powerhouse Mixed use development opportunities Emerging tech sector Industrial demand Overview Overview Graeme Peacock Challenges and opportunities significantly more affordable than the Figure 1 Residential development has increased As an affordable location that is attracting public and private investment, most expensive core city, Bristol, which rapidly and is now exceeding local plan targets new opportunities are beginning to emerge in Newcastle has a house price to earnings ratio of 9.11. The city has also benefitted from 3,000 Newcastle is one of the fastest growing In the future, Newcastle will benefit The city in context pro-development local government. cities in the UK, with 21,000 new from the North of Tyne devolution Comparison with the other nine Following the downturn during the homes and 14,000 new jobs expected deal. Implemented in 2018, the deal UK core cities and additional strong global financial crisis, housing delivery 2,500 over the next 12 years. The city’s will bring Newcastle, North Tyneside regional centres such as Oxford, has risen strongly from 2013-14, and for population is projected to reach and Northumberland together under Reading and Edinburgh demonstrates the last two years, new housebuilding 2,000 over 310,000 by 2030, an increase of a Mayor, and will bring an extra £600 Newcastle’s strengths, and the areas has been equivalent to 2% of existing 6% from 2016, while the city region million of investment to the region over where the city faces challenges. housing stock. None of the other population is projected to be 2.75 the next 30 years. The city is becoming more cities in the comparison group have a 1,500 million by 2030. The powers devolved to the new prosperous, with earnings growth of housebuilding rate higher than 1.6% of The combined urban cores of Combined Authority will include land 26% between 2007 and 2017. Of the existing stock. 1,000 Gateshead and Newcastle are the key acquisition and disposal, and the ability comparator cities, Leeds is the closest Although Newcastle has a low Net Additional Dwellings Net Additional employment area in the North East, to establish Mayoral Development with earnings growth of 22% over the proportion of the population educated to and the main driver of the city region Corporations to serve North of Tyne’s same period. NVQ4 or above (33.8%), it does manage 500 growth. It benefits from high levels housing and regeneration ambitions. Rising earnings combined with to retain a high proportion of graduates, of accessibility and connectivity; Four Neighbourhood Opportunity moderate house price growth means with over 36% of students choosing to approximately 299,000 people work in Areas in Newcastle have already Newcastle has relatively affordable remain in the city after graduation. The 0 the urban cores, and 45% of employees been identified in the Core Strategy, housing. Median house prices are 5.85 city also has a global pull; nearly 30% 2011-12 2010-11 2017-18 2012-13 2016-17 2015-16 2014-15 travel to work from outside the two which have potential to deliver over times median earnings, in line with of students at Newcastle University are 2013-14 2009-10 2007-08 2006-07 local authorities. 20,000 homes. Liverpool, Sheffield and Glasgow, and international students. 2008-09 Source MHCLG 2 3 Overview City Centre Development New access to finance should stimulate the city’s tech sector Where next for city centre development? The growth A range of uses are required to support a vibrant city centre of the tech Grade A office space has significantly block, due for completion in the second buildings are targeting start-ups and diminished after a decade of limited half of 2019, which will help to make a SME occupiers, likely to be geared sector development within Newcastle’s core dent in the shortfall of Grade A supply. towards Newcastle’s emerging and the repurposing of a number of Newcastle also has strong technology and media sectors. Newcastle has seen a significant buildings to retail, leisure and student partnerships between the private However, The Lumen will cater for growth in the tech sector over housing. Grade A supply is currently at and public sector, supporting and a larger anchor tenant. the last five years, with digital 175,000 sq. ft. This total is 15% below accelerating the development and The Stephenson Quarter is a major tech start-ups increasing by 154% from 2011 to 2016. With the long- the 10-year average, but more notably, growth of the city. A £92m investment mixed use scheme including the 35,000 awaited JEREMIE2 funding now However, Newcastle faces several In addition to office space, the none of this is made up by new into the Newcastle and Gateshead’s 80 sq. ft. Rocket office building, which has live, new access to finance should challenges that need to be Core Strategy for Newcastle specifies development. Failure to meet demand hectares Accelerated Development Zone been fully occupied by Convergys since also stimulate the city’s tech addressed to keep up with other retail development as a particular has limited the growth prospects of is creating a clustering effect, which will its completion in 2016 – an indication sector. The £120 million fund could competing cities across the UK. priority for the urban core. It sets out local businesses and has made it harder stimulate productivity and job growth. of the demand for new office space in support 600 businesses and help In 2018, £27m in venture capital a desire to improve the range, quality to attract new occupiers. the market. The North East Futures create around 2,500 jobs over the funding was invested in companies and quantity of retail provision, with With this lack of supply in the A mixed use approach University Technical College (UTC) next five years. The then minister of state for headquartered in Newcastle, the specific ambition of increasing the city centre, growth has been inhibited However, funding for speculative and the six-storey Phoenix office digital, Matt Hancock, named outperforming Birmingham, Leeds amount of comparison retail by 50,000 over the last 10 years with occupiers commercial development has been development is of particular interest. the North East of England the and Glasgow. sq. m. of floor space. Our analysis reliant on refurbishments to bridge very restricted. One way to deliver new The two buildings will be mutually fastest growing tech hub outside But Newcastle still has a business suggests that future developments the gap. Grey Street remains a popular commercial space is through mixed beneficial and interlinked. Phoenix will of London. Business growth and start-up rate per capita that is lower should seek to provide flexible retail location and refurbished space is use regeneration schemes where the accommodate dynamic, high-growth collaboration have been stimulated than all the comparator cities. and leisure formats that are currently letting up at speed, with several different uses limit the amount of companies and offer the potential for by a number of support networks This may in part be due to the lack under-represented in the city centre, as transactions in recent months including exposure to one single sector. cooperation with the adjacent UTC, including Digital Union and Dynamo, companies that specialise of appropriate commercial space to well as increased cultural, community Earl Grey House and 71 Grey Street. With this in mind, Newcastle is giving students work experience and in raising the profile of members attract new occupiers. The 2010- and civic uses, rather than solely Refurbishments have plugged the gap seeing a new wave of mixed use city mentoring opportunities. In return, and the sector as a whole. 2030 Core Strategy identifies the increasing traditional retail supply. over the last few years, resulting in centre regeneration schemes, which are new businesses to the area are able to The recent establishment dated nature of some of the city’s Given the importance of Newcastle impressive rental growth of around revitalising the urban core and enabling tap into a skilled talent pool. of the Newcastle Tech Trust, a office stock as a challenge. city centre as an economic hub for 10% on certain buildings. However, it to expand outward. Finally, East Pilgrim Street group of experienced founders The provision of more high- the wider North East region, creating new developments are the current These schemes are providing represents one of the most strategically that understands the needs of specification, serviced and flexible an urban core that acts as a focus for preference for larger occupiers as older complementary rather than competing important city centre regeneration early-stage, high-growth tech companies, is further empowering office space, concentrated in the investment and business, and meets buildings are less able to accommodate space. Helix – a £350m joint project areas in the north of England. The ambitious technology start-ups urban core, will be essential to the the needs of occupiers and residents modern methods of working. between Newcastle City Council, northern block of the site is allocated and scale-ups. Newcastle is home strength of Newcastle’s emerging will be critical for the long-term Innovative approaches to Newcastle University and L&G – for retail led development which to the only FTSE 100 software technology and media sectors. success of the region. ■ development have been key to unlocking creating a new innovation cluster in provides an opportunity to extend company in the UK – The Sage sites and the city council have made the city. the prime retail-led offer. This will be Group plc. good use of wraparound leases to In recent years there has been a supported by mixed uses in the central Key sectors attracting venture capital investment support office development.