Smaller deals dominate as downturn distorts city offices take up

Legal, financial and media firms helped buoy office take up in Bristol’s business centre throughout 2011, according to property specialists Colliers International.
Movement within the three heavy-hitting sectors helped lift city centre takeup to 425,000 square feet – just seven per cent down on the previous year.
Overall take up (in and out of town) was 700,000 square feet in what commentators admit was a challenging market.
Bristol offices specialist James Preece said the majority of moves had been in the small to medium sectors, with an increase in 10,000-15,000 square foot take up but a corresponding drop in the key 15,000-25,000 square foot sector.
The three largest transactions in the market were the pre-let of 2 College Square (26,300 square feet) to CMS Cameron McKenna, the letting of West One, Deanery Road (27,221 square feet) to Triodos Bank and the letting of the West Wing, Glassfields, Temple Quay (27,224 square feet) to Creston PLC.
Top grade A buildings maintained a headline rent of £27.50 psf, with incentives between three to three and a half months per year of the term certain on average. Top tier grade B rents remain in the high teens and lower tier grade B around £10.00 psf. Incentives for grade B properties are typically around two and a half to three months per year of the term certain.
There are still high levels of grade B stock whilst grade A availability is down to 364,000 square feet.
In contrast, the out of town market fell 32 per cent compared to 2010 with 273,000 square feet of take-up, although this was only 16 per cent below the long term average.
James Preece commented: “As with the in-town market the most noticeable difference in 2011 was a lack of large deals, the largest letting being 23,000 square feet.”
The largest transactions of the year were the lettings of 22,740 sq ft at the Pavilions to PADI, Motability taking 20,765 sq ft at Building 440 Bristol Business Park and Lysander House, securing a letting of 18,796 sq ft to Brightside Group.
Grade A rents remain in the £20.00–£22.00 psf range, with top tier grade B between £15.00–£18.00 psf. The lower tier grade B rent range is between £10.00–£14.00 psf. Incentive levels have also remained in general between 2 ½ to 3 ½ months per year of the term certain.
He concluded: “There are a number of sizable deals that are due to complete in the first half of 2012 which should assist in reducing the high level of supply.
“Given the various economic issues reported during 2011, many companies chose not to relocate despite the pendulum remaining in favour of tenants seeking new accommodation. The high level of overall supply will mean that rents are likely to see very limited if any growth during 2012.”