22nd January 2015
Property Insight
2014 commercial property activity in the South West was the strongest since the financial crisis, driven by a buoyant regional investment market, the return of speculative development and strong occupational demand.
We saw confidence accelerate throughout the year as agreements for the planned Hinkley Point C power station were approved by the European Commission and a £2 billion investment in the region’s road infrastructure was announced in the Chancellor’s Autumn Statement last year. These two multi-million pound projects alone will significantly strengthen our economy, opening up major new development opportunities in Bristol, Somerset, Wiltshire and Gloucestershire and creating hundreds of new jobs.
Notwithstanding uncertainties from the forthcoming general election and the possibility of interest rate rises, optimism remains high that recovery can be sustained in 2015.
The regional investment market was strong throughout 2014. Exceptional levels of demand in the London market has driven pricing to a point where the regions are perceived to offer better value and therefore attract strong institutional interest. The South West and its principal centres are performing well in a UK context, fuelling investment interest and providing attractive comparative investment returns. We expect this momentum to carry into 2015 with strong competition for the limited attractive opportunities across all sectors.
The South West continues to play to its strengths of financial, professional and creative services, engineering, technology, defence and energy. Predicting and meeting the property needs of these occupiers over the next 5-10 years is essential for the region’s continued success.
Those developers who had the confidence to commence speculative commercial development in 2013/14 have been vindicated, with high profile transactions in Bristol to PwC and KPMG and record rents achieved through our agency teams. In Gloucester we also secured the city’s largest and most significant transaction with the pre-let of 52,000 sq ft at Gloucester Business Park to Horizon Nuclear Power Services.
Permitted Development Rights, which allow the conversion of lower grade office stock to residential use without planning consent, are having a positive impact on all of our town and city centres. In Gloucester, Bristol, Swindon, Taunton and Bath, there are a number of conversions in the pipeline which will deliver schemes in 2015. In Bristol alone, over 1 million sq ft of offices has been identified for conversion. While in the short term this reduces the level of supply and therefore choice for occupiers seeking new premises, it is encouraging new speculative development and speculative refurbishment in Bristol and Bath and rental levels will increase again in early 2015.
The food store and logistics sectors are two market sectors that are performing strongly. Lidl and Aldi have aggressive expansion plans across the region while occupiers involved in internet fulfilment are actively seeking strategic depot sites, as evidenced by GeoPost’s recent site acquisitions at Bridgwater and Exeter.
The retail sector is still a picture of winners and losers. The prime locations perform strongly but for many secondary and tertiary retail centres and high streets, trading conditions remain extremely challenging; their position isn’t helped by the as yet unresolved issue of business rates relief and reform of this contentious levy must be high on the new Government’s agenda.
Swindon’s retail area has been given a huge boost with the opening of the Regent Circus shopping centre late last year and retailer demand for units is strong. Meanwhile in Bristol, The Mall at Cribbs Causeway’s recently-announced expansion plans demonstrate its confidence as the region’s leading retail and leisure destination. If approved this expansion, together with the outline plans for the redevelopment of the Filton Airfield site, will represent a multi-million pound transformation of the North Bristol skyline. The on-going success of the Temple Quay Enterprise Zone and progress on the long-awaited Bristol Arena are further examples of growing economic confidence.
Looking longer-term, the prospect of city and regional devolution, while potentially some way off for the South West, provides a tantalising opportunity for the region to exercise greater control over its economic future, driving investment in projects that matter to us such as transport infrastructure and creating new jobs.
Martyn Jones, senior partner
Published in the Western Daily Press Business Guide – 22 January 2015
