16th January 2015
Alder King’s market report confirms strongest take-up for seven years and pressing need for more speculative development
Market Monitor, Alder King’s definitive review of the region’s commercial property market, confirms the strongest level of take-up for seven years and a correspondingly sharp drop in supply. The detailed review of 2014 activity in 12 major South West and Wales centres reveals a pressing need for further speculative office and industrial development in many of the region’s major commercial centres.
The 30 page report shows South West office take-up rose last year by 49% to 2.2 million sq ft, with Bristol recording 1.25 million sq ft of take-up. The supply of office space in the South West is down nearly 20% to just 3.8 million sq ft compared to 4.8 million sq ft in 2013. In Bristol, there is less than 200,000 sq ft of new Grade A space available in the city centre. There has also been a sharp reduction in the availability of Grade B space in the city, partly as a result of PDR.
South West industrial take-up increased by 5% to 4.8 million sq ft but was constrained by the exceptionally low level of supply. In Bristol for example, available industrial space is at its lowest level for 11 years while in Gloucester, supply is at a 30 year low. Supply fell by over 16% from 6.8 million sq ft to 5.7 million sq ft of stock. However demand is focussed on better specified space and new build activity is now underway in Bristol, Gloucester, Wellington, Bridgwater and Truro.
In South Wales, demand for office and industrial space increased by 59% and 57% respectively. Supply fell marginally by 1.5% and 2.8%. In Cardiff, office take-up was a healthy 77% up on 2013 figures at 531,000 sq ft. The city will see a major boost in supply over the next 15 months with over 300,000 sq ft of new offices forecast for construction in the ‘Financial Services’ City Enterprise Zone.
Cardiff industrial demand was also up 33% at 763,000 sq ft but supply is now at a six year low and is expected to decline further as a result of limited speculative development and reducing levels of quality stock coming to the market.
The retail sector stabilised in 2014. The majority of high streets saw a reduction in the number of voids and some centres including Exeter, Plymouth and Swindon saw a growth in rents.
The South West and Wales remain attractive to investors looking for value outside London. The total value of the South West investment market rose from £695 million in 2013 to £1.07 billion in 2014. The two largest transactions were the sale of 50% stakes in two of the region’s leading shopping centres – Cabot Circus in Bristol and Princesshay in Exeter. Cardiff also saw a dramatic 59% increase in the volume of investment transactions, with £209m of transactions last year.
The very strong performance of both the occupational and investment markets in 2014 reflects improved occupier confidence. Developers, including Skanska and Salmon Harvester/NFUM, with the confidence to commence speculative office and industrial development have been vindicated with high profile lettings and record Bristol office rents of £28.50 per sq ft. All centres except Bridgwater, Newport, Swansea and Truro recorded rental increases over the course of the year.
“After a very strong finish to 2014, 2015 will see further increases in activity levels across all property sectors with robust demand for quality commercial space and well-located sites together with further rental growth,” says Simon Price, head of agency at Alder King.
“The challenge for 2015 is to bring forward more speculative development in key locations including Bristol, Bath, Cardiff, Exeter, Gloucester and Bridgwater to replace dwindling stock and meet rising demand.
“The success of speculative office schemes at 2 Glass Wharf and 66 Queen Square in Bristol confirms strong occupier appetite for Grade A office accommodation. Bristol and Bath will hopefully see more speculative development later this year and Cardiff will benefit from significant new development but further office and industrial schemes need to come on stream over the next 12-18 months if developers want to capitalise on this market cycle.”
Alder King’s Market Monitor 2015 provides a summary of the commercial property market in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton and Truro. It also covers Cardiff, Newport and Swansea in South Wales. The full report is available to download at www.alderking.com/publications. A mid-year update will be published in July 2015.