The laws of supply and demand mean that Bristol’s property market is in a far better position to weather any economic downturn than it was prior to the last recession, according to experts at global real estate advisor Colliers International.
Earlier this year Walter Boettcher, the firm’s director of forecasting and research, told business leaders in Bristol that an end to the Brexit impasse would “open the floodgates” to a spending spree from businesses which are currently delaying investment decisions.
He said there were large reserves of cash waiting to be released by businesses pending some certainty on the UK’s future relationship with the EU.
And now, with the clock ticking down to the UK’s intended EU departure date on October 31, senior figures at Colliers International’s Bristol office say the city is well placed to withstand any economic turbulence in the months ahead – regardless of the Brexit outcome.
James Preece, Director in the National Offices team at Colliers International in the South West and Wales, says the number of cranes dotting the city’s skyline illustrates the dynamism of Bristol’s property market.
“The fundamentals are strong and developers’ confidence in the market is shown by the number of speculative office schemes which are being built,” he says.
“You only have to count the number of cranes in the city centre – and you can see seven from our boardroom window alone, operating at three separate schemes within a square mile of each other.
“Cubex is proposing to develop 116,000 sq ft at the former Avon Fire and Rescue HQ and BT is rumoured to be taking 200,000 sq ft at Assembly, in what would be the largest pre-let since Lloyds Bank moved into Harbourside. Meanwhile Channel 4 has taken space for its new hub at Finzels Reach.
“With an overall vacancy rate of only 5.5 per cent in the city centre, availability in the Bristol office market is the lowest among any of the big six regional cities, and this is key.
“The sustained strength of demand that we’ve seen since 2015 means that we would expect to see the majority of this new speculatively-built office space to be pre-let at completion. This was the case at 66 Queen Square, 2 Glass Wharf and most recently, Aurora at Finzels Reach.
“There is a marked contrast between the current situation and the one we had prior to the last downturn in 2007/08. Then, there was around 2 million sq ft of space available in Bristol city centre, whereas now that figure is a mere 650,000 sq ft.”
Tom Watkins, Associate Director in the Industrial and Logistics team at Colliers International, says this picture is mirrored in the industrial sector, where Avonmouth remains the focal point of development.
“The latest regional figures from the Industrial Agents Society Western Branch show that take up for Bristol and the surrounding area in the first half of this year totalled 660,553 sq ft – an increase of 7 per cent on the H1 2018 figures of 617,000 sq ft. The immediate occupation of units within recently completed developments, such as those at Horizon 38 and Vertex Park, have boosted these figures.
“There is still a healthy number of requirements for Bristol, and while some companies would prefer to delay relocating to a larger premises until there’s more certainty within the market, operational demands are forcing them to move quickly.
“As in the office market, the fundamentals remain strong within the industrial sector in Bristol thanks to a lack of supply and a consistently high level of demand. As a result, occupiers are competing aggressively for available stock.”
Carys Allen, Surveyor, National Capital Markets, says the ongoing shortage of stock in the property sector is leading to a wave of competitive bidding among investors.
“Temple Quay House in Bristol has just been sold for £73.35 million, reflecting a 4.03 per cent yield, which is the lowest yield for a sub-20-year lease outside London,” she says.
“Meanwhile changes in the retail market are giving investors the opportunity to capitalise on lower values, as we saw recently with the of The Galleries by InfraRed Capital to La Salle Investment Management, for a discounted price of £32 million.”
“Bristol’s property market is well placed to weather any economic or political storms that may be heading our way,” says Tim Davies, head of South West and Wales at Colliers International.
“Regardless of what transpires in regard to Brexit and indeed the wider global economy in the coming months, Bristol has all the resilience and characteristics to succeed.”