Leading property consultancy Knight Frank has highlighted the shortage of quality Grade A office space as a key challenge for the Bristol office market during 2015.
It believes the shortage is an outcome of the “stellar year for Bristol” during 2014, with office take up breaking many records. More than one million sq ft of office space was let across the greater Bristol region in the year for the first time since 2008, with total office take-up reaching 1,266,535 sq ft.
Martin Booth, who heads the Knight Frank offices agency team in Bristol, said: “As a result of such strong take up, notably in Q4 2014, identified demand has reduced but remains at a very healthy level. With this bedrock of identified demand, together with inward investment and the rapid growth within the professional service and TMT sectors, we are quietly confident that city centre take up will exceed 600,000 sq ft in 2015.
Take up within the city centre of standing ‘new’ space was at its highest level for 15 years whilst 2014 saw the first pre-lettings during construction since 2009. This generated new prime headline rents which grew to a rumoured £28.50 per sq ft through the letting of 66 Queen Square to KPMG.
The availability of space, including space under construction, fell by over 40% during 2014 to approximately 1.15m sq ft and ‘Available’ space now under construction is limited to 98,250 sq ft.
Martin Booth added: “With available space under construction being so restricted, there will be a clear shortage of city centre grade A space later in 2015/2016. Given the extended timeline for delivering new product to the market, parties able to deliver refurbished product within shortened timeframes will benefit. Of course, the fact that several buildings appropriate for refurbishment have now been lost to alternative uses will further restrict supply.”
Turning to Bristol’s out of town markets, where take up for 2014 totalled 429,676 sq ft – the highest since 2001 and the third highest total in 25 years – he said: “The near absence of Grade A space in North Bristol must bring the need for speculative development into sharp focus.
“The constraining factor to date has been lease lengths rather than rents. We anticipate that evidence created within the next few months will underline the viability of such development. Given the tightening of supply in North Bristol, until further speculative space is brought to the market, alternative out-of-town areas will benefit from continued strong demand.”