The Bristol office market has seen a robust start to the year, with take-up during Q1 totalling 116,457 sq ft in the city centre, and 61,523 sq ft out-of-town, according to the Big Nine Report from strategic real estate adviser Avison Young.
The city was top performing in 2020 for office take-up, says Avison Young in its latest quarterly analysis of the office markets, and this positivity is continuing into 2021. And although total take-up in Q1 was 20% below the ten-year average in both city centre and out-of-town markets, this is not surprising given the current Covid:19 restrictions.
Sentiment has improved in recent weeks, which is backed by the expected deals in the pipeline and new schemes under construction, coupled with a decline in enthusiasm for home working from both employers and staff during the 3rd lockdown, leading to an increased appetite for a return to the office when it is safe and legal to do so. Headline city centre rents now stand at £37.50 per sq ft.
The largest city centre deal was 21,888 sq ft let to the Department of Work and Pensions at 101 Victoria Street (one of five similar deals across the Big Nine cities and helping give the public sector its strongest level of take-up in 12 months), and there were two further deals over 10,000 sq ft, to Pure Electric at Wapping Road, and Access to Music at Programme.
The out-of-town market was dominated by the largest deal of the quarter, 32,000 sq ft to NNB Generation Ltd at Aztec 800 on Aztec West Business Park. There were also a handful of c 5,000 sq ft deals, two of which were also at Aztec West, to Chadwick Business Centres, and Candid. Headline rents out-of-town remain at £23.50 psf.
The recent positive sentiment in the market is supported by the large development starts: CEG’s 184,000 sq ft EQ development started on site at the end of last year, and Tristan Capital/Candour are understood to be undertaking preparatory works ready to break ground later this year on the 207,000 sq ft Welcome Building at 4 Glass Wharf.
Additionally, the speculative 92,000 sq ft Distillery at Glassfields has recently completed, and the 201,000 sq ft 1 Assembly (fully pre-let by BT) is due to complete in the summer. One Portwall Square and Halo at Finzels Reach will also be finished later in 2021, with space still available in both buildings.
In total, 735,000 sq ft is currently under construction, with 38% pre let.
Paul Williams, director, Avison Young, Bristol, says,
“A combination of lockdown and the traditionally slow start to the year has not surprisingly affected take-up activity for the Big Nine office markets during Q1. However, sentiment is improving noticeably, enquiries are increasing, and there is enough activity in both the occupier and investment markets to indicate that as restrictions continue to ease, activity will increase throughout the year.
“Bristol continues to show its resilience and we’re positive for the year ahead.”
Total take-up during Q1 across the Big Nine cities amounted to 783,420 sq ft in the city centres, and 676,126 sq ft out of town, 41% and 14% below the respective ten- year averages.
Paul continues, “Covid has accelerated the appeal to occupiers for a wider range of flexible lease arrangements, whether that is short term leases, regears, or management agreements, and Cat A+ ready fitted or ‘plug and play’ options increasingly popular. With grey space coming back into the market, occupiers are also picking up ready to go space more easily, where they do not have to commit to the upfront capital cost of fit-out.
“As occupiers look for solutions to bridge the divide between indefinite working from home, and a total return to the office, the hybrid working model, a combination of home, the office and local flexible working, is gaining significant traction, and having a noticeable effect on location decisions.”
Following a strong finish to 2020, positive sentiment continues in the Big Nine office investment markets. Several large deals have completed since the start of the year and others are under offer. While total volumes for Q1 amounted to £177 million, 70% down on the ten-year average, Q2 volumes have already surpassed this figure.
Bristol was the site of several key transactions during Q1. Aberdeen Standard Investments bought Temple Quay House for £75m. The government backed scheme transacted at a yield of 3.7%, a record for the regional markets. In February, Kuwait-based investor Kamco and M7 Real Estate also bought TSB’s Bristol headquarters at Keypoint for £20m.