23rd January 2014
Market Monitor report reveals office and industrial space at five year low
Market Monitor, Alder King’s annual report into the region’s commercial property market, reveals that the supply of office and industrial space in the South West is at its lowest level for five years. The fall in supply, combined with a marked recovery in occupier confidence, means prospects for further speculative development and rental increases in 2014 are the most optimistic since the downturn began in 2008.
After strong take up in Bristol, Bath, Exeter, Gloucester, Swindon and Yeovil, the total amount of office space in the nine major centres of the South West now stands at 4.8 million sq ft, down from 5.7 million sq ft in 2013. Supply is expected to fall further as secondary offices are converted to residential use under Permitted Development Rights. The shortage of well-specified space is being addressed in central Bristol with speculative developments now underway by Skanska and Salmon Harvester which could push rental levels over the £27.50 per sq ft mark. Additional speculative schemes are likely to follow their lead over the coming year.
The supply of industrial space stands at 6.9 million sq ft across the South West, down from 7.93 million sq ft in 2013. Take up was lower last year in Bristol, Bath, Swindon, Exeter and Plymouth but activity was constrained by the lack of good quality supply. Speculative schemes are underway in Bristol, Gloucester, Wellington, Bridgwater and Newquay and in Exeter headline rents have just risen to a five year high of £7 per sq ft.
The retail sector saw a cautious level of confidence return in the latter half of 2013 with prime rental levels stabilising and good levels of demand for prime locations in larger towns and cities, particularly from the food-store and discount sectors.
The South West investment market gained in strength in 2013, most notably in the final quarter, with transactions totalling £695 million. Bristol, Bath, Swindon and Truro all recorded significant increases in the value of transactions compared to 2013.
Simon Price, head of agency at Alder King, said: “After a positive 2013, the coming year will see more speculative office and industrial developments coming on stream across the region, with subsequent increases in headline rents and downward pressure on incentives.
“With a resurgent residential land market and strengthening investor confidence in the regions, the coming year should see activity in the commercial property market return to pre-recession levels.”
Alder King’s Market Monitor 2014 provides a summary of the commercial property market in Bristol, Swindon, Gloucester, Bath, Taunton, Yeovil, Exeter, Plymouth and Truro. It also covers Newport, Cardiff and Swansea in South Wales. The full report is available to download here. A mid-year update will be published in July 2014.