The Bristol city centre market has been dominated by co-working deals this quarter, according to Avison Young’s Big Nine report, the quarterly update of regional office activity across the UK. This is tempered however, by a level of caution in the market, with property deals taking time to progress.
Accounting for over 1/3 of take-up, the two main property deals in the city this quarter were both within the co-working sector, to Spaces, who has taken 26,500 sq ft at Programme in All Saints Street and 30,611 sq ft to Clockwise Serviced Offices at The Generator Building, Finzels Reach. In addition, 9,781 sq ft has been taken by Landmark Space Limited at One Temple Quay.
Bristol is not alone in its demand for co-working. Its dominance is reflected throughout the Big Nine regional office markets during Q2, with over 600,000 sq ft of flexible workspace deals, similar to the annual totals over the previous two years.
Paul Williams, Director at Avison Young says, “The serviced offices sector is booming. It has accounted for the three largest deals in the city centre office market this quarter. There are further deals in the pipeline for the rest of the year as the flexible office space and co-working sector continues to grow strongly in Bristol and around the UK.
“Despite some uncertainty in the market there remains a good number of enquiries in the market and a landmark deal in the offing which will significantly boost take-up if it goes through, but exacerbate the already restricted supply of new space coming through.”
Elsewhere in Bristol city centre there has been a handful of deals in the professional, finance and TMT sectors of between 5,000 sq ft and 10,000 sq ft, and a large number of sub 5,000 sq ft deals.
Total take-up for the city centre for Q2 stands at 177,633 sq ft.
Currently there is very little current Grade A space available, with the two buildings under construction not due to complete until next year. 93,000 sq ft remains available at Glassfields on Temple Way, and 200,000 sq ft at 1 Assembly – although BT are reported to be interested in the whole building.
Paul continues, “As a result, we’re expecting to see a rise in headline rents this year, with a new high of £36.50 psf expected to be achieved before the end of 2019.”
Across all of the Big Nine regional office markets during Q2 take-up has been strong, with activity heavily skewed towards larger deals, city centre markets, flexible workspace and the TMT (telecoms, media and technology) sector. Conversely smaller deals, the out-of-town markets and traditional sectors such as financial, professional and business services have underperformed, according to Avison Young’s Big Nine quarterly update.
Figures from the report, which covers Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle show office investment volumes during Q2 amounted to £575 million, 5% up on the ten-year quarterly average.
In the occupational market, Q2 activity was 10% up on the long-term average, bringing the half year total to 4.3 million sq ft (6% up on the average).
Charles Toogood, Avison Young Principal and Managing Director, National Offices, comments: “Activity in Q2 was led by a number of large city centre deals, combined with record levels of activity in the flexible workspace sector. Q2 alone has seen over 600,000 sq ft of flexible workspace deals, which is already similar to the annual totals in the previous two years.
“Flexible workspace, TMT and consumer services accounted for almost 80% of activity over 5,000 sq ft. In stark contrast there was very little activity by the public sector, finance and particularly professional services sectors.”
In investment, overseas investors continue to drive the market, accounting for 85% of transactions during Q2. Mark Frampton, Avison Young Principal, Investment, says: “UK real estate remains a ‘safe haven’ asset and overseas investors continue to benefit from the materially weakened currency. Conversely there has been a notable slowdown in activity from the UK institutions.”
