The North East has seen one of the largest increases in Tech start-ups in recent years. Making sure we are offering the right working spaces to enable these growing companies to expand is a real challenge to the North East property industry, particularly with the creation of new high-quality space.
SMEs, those businesses with up to 250 staff, account for around 99% of Britain’s 5m businesses. Creating the right sort of space for those companies can be a challenge. The choice for occupiers can be limited, particularly for those outgrowing services offices and wanting to put their own character on their office space.
As far as landlords are concerned, creating SME space involves additional cost in separation works and providing shared services, and risks lower end values. Valuers and institutional purchasers often struggle with buildings with multiple young companies on short flexible leases. This in turn can make feasibilities on new build schemes hard to justify.
However, the market is responding to the changes in demand with some landlords taking on a higher risk. The office market in Newcastle has been through a period of steady growth over recent months with a steady take up of good quality space. Quorum in north Newcastle has seen good take up of the new small suites in both the Neon and Q11 buildings. The smaller SME focused units, in a range of 600 to 5,000sqft (space for 6 to 60 desks) have seen good take up.
At the Neon building, six of the 15 units have been leased in the first six months since the scheme was launched. The amenity led offering with meeting rooms, concierge reception service and lots of breakout space has attracted a range of SME occupiers. The amenities including pool table, table tennis and a retro space invaders machine have been really popular with the new tenants including Wandisco, Contec and Thingco. This is part of the shift in property to the ‘space as a service’ approach where amenity, shared spaces and landlord services are as important as the office space itself.
Office take-up in Newcastle in the last quarter increased compared to Q4 2018. The largest letting was at Quorum with Utility Alliance taking 11,465 sq.ft at The Lightbox building, however the bulk of the lettings were at the smaller SME end with the average deal size below 5,000sq.ft. and this is where the market has been most active. Demand has been driven by good jobs growth in Newcastle with increasing number of vacancies advertised. It has been reported by the recruitment website Adzuna, that there are five jobs for every person looking for work in Newcastle. This is a really strong signal about the strength of underlying demand. However, the level of vacancies is not currently translating into a fall in unemployment, which is again lagging behind the positive jobs growth across the rest of the country. It is a concern that we are still not delivering the skilled workers needed, and that further investment in skills and training is needed to fill these roles.
Many of these vacancies are in the fast growing digital tech sector, which in the North East now employs 30,000 people and has increased turnover by more than 25% in the last year to £1.26bn, making it the fastest growing tech cluster outside London. It is of vital importance to fill these roles to enable this rate of growth to continue.
This focus on recruitment and growth was evident at Quorum’s recent Jobs fair, run in conjunction with North Tyneside council, which saw dozens of companies offering multiple roles. This attracted over 1,000 people coming to investigate the opportunities that are available for job seekers at the growing business community at Quorum. Fergus Trim, Director with Broadoak, the Asset Managers at Quorum said: “The growth of SME companies, particularly in the Tech sector is of vital importance to the growing economy in Newcastle. Making sure we have the skills and also the right workspaces is crucial to helping these companies succeed.”
The team at Quorum worked closely with Newcastle based architects Faulkner Brown to develop the concepts and design of the 15 new offices in the Neon building. The new suites enjoy generous break out space and shared facilities and an urban feel to attract younger fast growth companies and has already been shortlisted for an award at this years North East Property awards.
It introduces creative design within an environment which will allow businesses of all sizes to mix and collaborate with shared meeting rooms and spaces. The new smaller office suites offer growing companies the chance to establish and grow in a business park full of big- name occupiers including the corporate headquarters of Greggs.
It is hoped that these new Tech companies will continue to grow within the Newcastle cluster and perhaps one may become the next Sage.
