Strategic real estate advisor Avison Young has released its quarterly Big Nine office market update for Q3 2020.
Total take-up activity amounted to 233,000 sq ft in Bristol during Q3, 5% up on the ten year quarterly average. Key to this activity was the out-of-town market, dominated by the 132,000 sq ft off-market transaction to engineering company Babcock at Bristol Business Park. This was one of the most significant deals nationally of the quarter.
There were also a handful of sub 10,000 sq ft deals out-of-town, including two at Aztec West: 9,000 sq ft to lawyers Davies and Co and 4,200 sq ft to technology company Huawei.
City centre activity has been more subdued, which included 10,700 sq ft to Xledger at Tower Wharf and 7,000 sq ft to Gleeds at Aurora among the top deals.
Paul Williams, Director, National Offices at Avison Young, Bristol, says,
“Looking forward to the rest of the year, some sizeable transactions are still being agreed, as well as a letting of 37,000 sq ft signed at 2 Trinity Quay after the end of the quarter. In addition, we are aware of significant interest reported in the 83,000 sq ft Bridgewater House which is coming back to the market at the end of the year. There are also a number of active requirements, many of them either public sector, health or Covid-related.
“We are seeing some occupiers downsizing their requirements or postponing previously planned relocations in favour of short-term lease extensions. Stock levels are rising with more tenant space coming to the market, and availability is now at more normal levels following the past couple of years of record low city centre stock.”
There are two speculative buildings under construction in Bristol: all 93,000 sq ft Distillery at Glassfields remains available and around a third of 110,000 sq ft Halo at Finzels Reach. They are due to complete this year and next year respectively.
As grade A transactions are scarce, there is little evidence to change the headline rent, which remains at £35.50 psf in the city centre and £23.50 out-of-town.
With the increase in government restrictions and renewed caution towards office occupation occupier demand is impacted nationally across the Big Nine cities. Transactional activity for Q3 amounted to 767,000 sq ft in the city centre and 546,000 sq ft out-of-town, well below the ten year quarterly average, although there was a noticeable improvement on the previous quarter.
Paul Williams, continues,
“As a number of occupiers look to rationalise their portfolios, there appears to be a ‘flight to quality’, as businesses consider taking less but better-quality space. With the way we work so closely under the microscope over the last few months, we believe that the office environment is expected to become less about process and more about collaboration and innovation.”