Bristol city centre office market resilience bodes well for 2021

James Preece and Richard Coombs, Colliers International

The Bristol office market is well placed for 2021, after a resilient showing amid difficult market conditions last year.

Latest research from global real estate advisor Colliers International shows that city centre take up was below the five-year average by 19 per cent at 506,293 sq ft and rents remained unchanged in 2020, with the £37.50 per sq ft prime city centre rent set in 2019 being equalled, although with a slight edging of incentives.

James Preece, National Offices director at Colliers International, said: “Low supply of new space and diverse demand have helped keep rents stable.

“The fact that Bristol city centre annual take up in 2020 was only 19 per cent below the five year average demonstrated exceptional resilience in the face of challenging market conditions, comparing extremely favourably with other major commercial centres across the UK

“Requirement levels are still strong which bodes well for the coming year despite the restrictions, although the bulk of activity is at the sub 5,000 sq ft end of the market. With the accelerated rollout of the UK’s vaccination programme and a gradual return to normal operating conditions in H2 2021, we foresee a far more encouraging outlook with a bounce back in occupier and investor confidence expected from Q3 onwards.

“While demand is steady, void periods have been elongated by the COVID-19 pandemic and city centre vacancy has increased from 4.9 per cent to 6.5 per cent. Grade A availability was constrained throughout 2020, but delivery of new/refurbished space later in 2021 will stimulate demand and reinforce the flight to quality.”

The ‘Bristol Offices Quarter 4 2020’ research from Colliers International showed that the largest city centre deal in Q4 was DAS taking 37,828 sq ft at Trinity Quay. There were a total of 24 city centre deals in the final quarter, the highest level since the pandemic began in the UK, with an average size of 7,296 sq ft.

The largest Q4 out of town deal was 14,000 sq ft to Fertility Bristol at 135 Aztec West, and out of town vacancy rose in this quarter to stand at 10.4 per cent up from 7.45 per cent in January 2020.

James Preece added that take-up in the out of town office market last year was 20 per cent below the five-year average, but cautioned that this figure was significantly boosted by the pre-let of 132,000 sq ft at Bristol Business Park to defence company Babcock in Q3. This represented just under 50 per cent of total out of town transactions in 2020.

Total Bristol office investment volumes for 2020 reached £203 million, with just three deals being tracked in the final quarter of 2020. The highlight was the sale of the city centre office building Spectrum to Impact Capital for £20 million.

Richard Coombs, National Capital Markets director at Colliers International, said: “Investment volumes were 30 per cent down on 2019 as the market coped with the limitations caused by multiple lockdowns.

“Deal numbers in 2020 were 40 per cent below the five year average, with just 11 individual transactions last year compared to 22 in 2019, although average lot size rose to nearly £20 million up from £13 million in 2019.

“Nevertheless, yields and capital values have remained stable, and investor confidence for prime city centre stock is likely to bounce back once lockdown incentives have eased later this year.”