Greater Bristol’s office market saw a slow start to 2019 but with continued uncertainty surrounding BREXIT and a lack of available quality office supply, this was only to be expected reports the Bristol Office Agents’ Society.
In Q1, the Greater Bristol market transacted a total of 154,005 sq ft which is 20% down on the average take-up for this period during the last 5 years. However, with continued high demand and several buildings known to be under offer, the Bristol OAS predicts good take-up for the remainder of 2019.
The city centre transacted 58,141 sq ft across 16 deals in the first quarter of this year, well below the 5 year average of 122,041 sq ft. The largest deal was Forrest Brown taking a lease assignment from OVO energy at Templeback for 23,207 sq ft of second floor space. Other than this, the city centre saw no other deals in excess of 5,000 sq ft. This is particularly unusual, but does not reflect a slowdown in demand, being more a symptom of the continuing slack of supply.
A large proportion of city centre activity was formed of Grade A take-up, indicating strong demand for good quality space where it is available. The letting of Templeback, along with lettings at Hartwell House and 2 Glass Wharf, gave a total Grade A take up of 26,429 sq ft, which represented 45% of overall city centre take-up. Prime headline rents have remained stable at £34.50psf and secondary rents are also performing well, achieving rents in the high twenties. Once new supply is brought to the market, the Bristol OAS expects to see further increases in headline rental levels.
The out of town market fared better in Q1, seeing take-up of 95,864 sq ft from 13 deals – ahead of the 5 year average for this period. The largest of these deals was St James Place’s early acquisition of 40,760 sq ft of space at 2610 Aztec West. The building is let to Babcock until later this year but St James Place has signed an agreement to take the space as soon as it is available. The out of town market saw two further deals in excess of 10,000 sq ft, being Integral’s acquisition of 13,408 sq ft at 730 Aztec West and Elbit Systems signing for 12,760 sq ft at the newly refurbished 600 Aztec West, the latter setting a new record rent for the out of town market at £23.00psf.
Overall, the Bristol office market is suffering from a lack of supply. However, there is promise in the pipeline with several developments now spec building. Both Royal London’s The Distillery and AXA’s Building A of Assembly are now on site and are set to provide 290,000 sq ft to the market in 2020, and with other sites such as Halo in for planning, good supply coming forward is expected.
Paul Williams, Director of Office Agency at Avison Young said: “For several years now the city centre office market in Bristol has been constrained by lack of stock, in particular a shortage of new Grade A space. As a result we have seen landlords increasingly willing to invest in refurbishing buildings in order to meet tenant’s expectations. For example we are already seeing strong interest in 2 Trinity Quay where our clients RBS are refurbishing 70,000 sq ft which will be ready later this year, making it one of the largest pieces of space coming to the market this year.”
BNP Head of Office Richard Ford added: “A decline in take up in in Q1 2019 is not surprising given the wider political circumstances and I don’t believe is reflective of the relative health of the Bristol market which has performed well in the shadow of Brexit. There remain a number of significant requirements in the market so we anticipate greater activity over the remainder of the year – however, supply remains a critical issue and the speculative developments now on site can’t be delivered quickly enough”