The analysis shows that 2011 has seen a gradual improvement in the Greater Bristol office market, with an increased number of deals completing and a steady flow of new enquiries coming through from businesses interested in taking space in the city. This take up activity has led to a reduced supply of new, immediately available, Grade A space in the city; stock levels now stand at under 250,000 sq ft, with only two new buildings currently under construction. Alder King highlights that this figure is significantly lower than the levels available in the other major regional cities including Birmingham and Manchester.
The consultants also believe there is the potential for the first time in three years for some headline rent growth at the top end of the office market on the best quality new space, due to the restricted supply available. They also predict that the level of incentive packages on offer for new space will begin to reduce by the end of this year.
Simon Price, head of agency at Alder King said: “Looking to the future there are improving prospects for better quality new and second hand accommodation in North Bristol where no new accommodation is currently under construction. However, we foresee that there will continue to be a trend towards flexible leasehold transactions and very little freehold owner occupier activity, primarily due to the ongoing difficulty in securing funding from the main lending institutions.
“Overall the picture continues to improve gradually and we predict that overall take up by the end of the year will be higher than that achieved in 2010, continuing the upward trend in market performance.”
The Bristol industrial market also witnessed improving levels of activity, but again this is set against a backdrop of diminishing, good quality supply.
Alder King warns there is now no new industrial space in the 10,000 sq ft to 500,000 sq ft size bracket currently available for immediate occupation. Supply stands at circa 4.25 million sq ft, but a large proportion of the accommodation is of very poor quality in terms of specification, location and general suitability.
The land supply remains focused on Severnside, albeit this will change with emerging opportunities such as the Rolls Royce site in North Bristol. None of the developers controlling land are promoting speculative development, although a few are openly stating that they will speculatively build on the back of a reasonable sized pre-let or pre-sale. There appears to be an increasing acknowledgement that rents/capital values will need to move forward in order to make development, pre lets or pre sales viable.
The bulk of activity still remains in the sub 10,000 sq ft category with good levels of demand from small owner managed businesses and owner occupiers seeking to buy freehold. Again there is a limited available stock at values which are sustainable from a funding and valuation viewpoint.
In general terms, Alder King has witnessed a return of the mid range requirements in the 15,000 sq ft to 50,000 sq ft size range. However they warn that there needs to be some clear evidence that these parties are taking space before determining whether or not this is a trend.
The retail and leisure sector in Bristol has also witnessed virtually no new development, with demand for secondary and tertiary locations described by Alder King as “patchy”. However, the foodstore market place remains active, with strong competition seen for convenience store sites. Headline rents and investment yields for prime property are holding up well.
Alder King contacts:
Office Agency: Simon Price; 0117 317 1084
Industrial Agency: Andrew Ridler; 0117 317 1071
Retail and Leisure Agency: Charles Russell-Smith; 0117 317 1043
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