The Bristol office market bounced back to life in 2014 with the best year of take-up in the city centre for a decade. The city recorded the highest increase in take-up amongst the nine cities studied in the latest Big Nine Report from commercial property adviser GVA.
“This success means companies are looking at Bristol as a serious relocation option and prime rents are likely to be pushed on towards the aspirational £30 per sq ft mark to be in line with other regional cities such as Birmingham and Manchester,” comments Richard Kidd, director of office agency at GVA in Bristol.
A total of 836,858 sq ft of office space was sold or let during the year and, in addition, a further 225,443 sq ft of office space was sold to developers, mostly for conversion to residential use. With the annual average take-up for the five years from 2009 to 2013 just 425,000, sq ft, that’s just half of the figure for 2014 as a whole.
Richard Kidd continues: “The figures for 2014 have been boosted by a very strong fourth quarter, where a number of long running requirements finally committed to taking space, including OVO Energy at 1 Rivergate, Temple Quay (69,000 sq ft), KPMG at 66 Queen Square (52,000 sq ft), Mapfre Abraxas at 1 Victoria Street (46,590 sq ft) and also PWC at 1 Glass Wharf (28,376 sq ft).”
In total the fourth quarter saw ten lettings in excess of 10,000 sq ft. bringing the performance to more than triple the quarterly average.
This is the highest increase in take-up among the nine cities studied in GVA’s Big Nine report. In Birmingham the increase was more than double, while Edinburgh saw a 68% increase and Manchester a 51% increase. Newcastle was the only city of the Big Nine to see city-centre take-up fall in Q4 2014, though out-of-town take-up in Newcastle was well above the five-year quarterly average, with an increase of 21%.
Richard adds: “Bristol’s activity has been the result of an uptick in the general economy giving occupiers more confidence to commit to upgrading their accommodation or to press ahead with expansion plans, but also the level of conversion of office space to residential use which not only has taken stock from the market but forced some tenants to relocate from those buildings being converted.
“This has meant a marked change in the market for those companies looking to take office space, particularly in the second half of 2014, with rent-free incentives being reduced and pressure on rents leading to the start of rental growth in the city-centre market.”
Following the deal to KPMG at 66 Queen Square prime city centre rents have increased to £28.50 per sq ft from the previous level of £27.50 per sq ft and this is beginning to have a knock-on effect on rental levels for both new Grade A and better quality second-hand space where landlords are now starting to review historical quoting rents upwards.
“In terms of inward investment, we have started to see more companies looking at Bristol as a serious relocation option and this has been underlined by the decision by Mapfre Abraxas to relocate to Bristol as well as Blue Speak Media,” he says. “There are a number of other inward investment success stories currently looking for space including companies such as Just Eat.”
Going forward into 2015, GVA believes that the Bristol market should continue to improve and prime rents could be pushed on towards the aspirational £30 per sq ft mark to be in line with other regional cities such as Birmingham and Manchester.
Nationally, GVA’s Big Nine reports that city centre take-up was almost three quarters above the five-year quarterly average across the nine major UK cities in the final quarter of 2014. City centre take-up reached nearly 2 million sq ft in the final three months of the year, compared to the quarterly average of 1.13 million sq ft. This was the highest quarterly total recorded since GVA’s Big Nine report launched in 2009, with the next highest quarterly take-up average being 1.5 million sq ft back in the third quarter of 2010.
Carl Potter, National Head of Offices at GVA, adds: “This is a significant set of figures that underscores the bounce-back in both developer and investor interest in the regional office markets. A number of cities have hit some record take-up figures, not just for the last quarter but 2014 overall. And this is despite falling levels of supply, which in 2015 is going to be a drag on take up but a cue for real increases in rental growth. “