Alder King’s mid-year report predicts strong take-up and rent increases for South West office and industrial space in H2 2015

Simon Price, head of agency at Alder King

Market Monitor Update, Alder King’s definitive mid-year review of the South West and Wales commercial property market, predicts strong take-up and rental increases for the region’s office and industrial sectors in the second half of 2015.

After a record-breaking end to 2014, take-up of office and industrial space across the South West fell back slightly to 3.1 million sq ft in the first half of 2015.  This picture was replicated in Cardiff, where office and industrial take-up was down to 448,000 sq ft compared to 555,000 sq ft in the same period last year.

However with over 2.25 million sq ft of known office and industrial enquiries in Bristol and over 350,000 sq ft of office enquiries in Cardiff, coupled with more speculative development in centres including Bristol, Exeter, Gloucester, Swindon and Bridgwater, Alder King is predicting a much stronger second half of the year.

Demand was affected by the uncertainties of the May General Election and the lack of supply in many locations.  The supply of offices across the South West peaked in mid-2012 at 5.7 million sq ft but has fallen by 49% to 2.9 million at the 2015 half year point.  After peaking in 2009 at 9.98 million sq ft, industrial supply has also dropped year on year to 4.1 million sq ft at the 2015 half year point.

In Bristol, the supply of office and industrial space is now at its lowest level for 10 years, standing at 1.45 million and 1.5 million sq ft respectively.  New Grade A office space in Bristol, including Skanska’s 66 Queen Square and part of Salmon Harvester/ NFUM’s 2 Glass Wharf, has let quickly to high profile occupiers at record rents, demonstrating strong demand for quality space.

Bristol’s office headline rent reached £28.50 per sq ft at 66 Queen Square earlier this year and Alder King anticipates that £30 per sq ft will be achieved for the first time before the end of the year.

Industrial rents are also increasing due to the lack of supply, with Bridgwater, Bristol and Taunton recording increases in the first half of the year.  Alder King anticipates that other centres will follow this trend.

Simon Price, head of agency at Alder King, said: “2015 is following the pattern of last year which saw a stronger performance in the second half of the year.  Now that the political situation has stabilised, we are expecting many of the key South West markets to deliver a robust performance over the next six months with increased take-up.”

Andrew Ridler, head of industrial agency at Alder King, added: “One of the key factors in the industrial market is the increasing demand from owner occupiers for freehold opportunities.  This is driving further speculative development and the commissioning of bespoke premises in a number of centres.”