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South West commercial property supply shortages drive record rental growth

The South West commercial property market proved extremely resilient in 2017, says Alder King in its latest Market Monitor report, outperforming market expectations.

The total take-up of office and industrial space in nine key locations was down on the record figures achieved in 2016 at 1.7 million sq ft and 5.15 million sq ft respectively, but remain comfortably in line with the five year average.  Take-up was largely constrained by the lack of good quality immediately available stock, limited large scale speculative development and the loss of consented sites to alternative uses.

Office & Industrial Demand & Supply in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton & Truro (sq ft)

Year

Office Demand

Office Supply

Industrial Demand

Industrial Supply

2017

1,719,000 sq ft

2,490,000 sq ft

5,152,000 sq ft

3,578,000 sq ft

2016

2,023,000 sq ft

2,724,000 sq ft

8,427,000 sq ft

3,694,000 sq ft

2015

1,909,000 sq ft

3,235,000 sq ft

5,852,000 sq ft

4,320,000 sq ft

2014

2,207,000 sq ft

3,862,000 sq ft

4,969,000 sq ft

5,695,000 sq ft

2013

1,481,000 sq ft

4,761,000 sq ft

4,544,000 sq ft

6,815,000 sq ft

 

Bristol’s office market recorded another strong year of take-up at 1.039 million sq ft.  The city centre market performed in line with the five year average at circa 615,000 sq ft while the out of town market exceeded the five year average by circa 33%.  There is now a severe shortage of new or newly refurbished Grade A accommodation in both the city centre and out of town markets.

The city’s industrial market saw take-up of 3 million sq ft, down on last year’s 4.5 million sq ft, but take-up was impacted by shortages of supply.

The ongoing shortage of quality office and industrial space is a concern, says Alder King’s head of agency Simon Price, with levels of both now at a 13 year low. 

“Supply levels have been falling for some time now and are becoming particularly acute.  This will impact on the region’s competitiveness in the next two to three years unless more development is brought forward quickly.

“The good news is that a number of developers have committed to speculative development, with office and industrial schemes underway in Bristol, Exeter, Gloucester, Wellington, Bridgwater, Swindon and Plymouth, but further new development is urgently required to satisfy requirements.”

The strength of the region’s occupational market resulted in a step change in headline rental levels in many centres.  Locations where rents increased last year include Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon and Truro.  In Bristol, the city centre office market finally broke through the £30 per sq ft threshold, ending the year at £32.50 per sq ft.  A new rental high of £35 per sq ft is widely predicted this year. 

2017 also witnessed a record volume of investment transactions, mirroring trends nationally.  Circa £1.5 billion of assets were transacted in the region’s key centres, up from £655 million in 2016.  Strong demand linked to the positive occupational backdrop maintained and drove values, with the industrial/logistics sector being the standout performer. 

Looking to the year ahead, Simon Price said: “We anticipate another strong performance from the region’s property market this year.  The occupational market remains buoyant, with strong demand across many sectors, particularly from the serviced office, logistics, engineering and public sectors.”

Alder King’s Market Monitor 2018 provides a summary of the commercial property market in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton and Truro.  It also covers Cardiff and Newport. 

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