With successful universities that support the research, media, technology and knowledge based industries, a focus on the green economy, and a strengthening professional services sector, the commercial property market in Bristol has a feeling of optimism about it.
At a seminar held on 13th October 2015 to launch a new report, The Future of the Bristol Property Market, together with a new development map of the city, commercial property adviser Bilfinger GVA outlined how this air of optimism has been fuelled by improved occupier demand and a seemingly insatiable appetite from institutional, private and overseas investors.
Total investment volumes for Bristol city centre offices so far in 2015 are already twice that of 2014 at £220 million, compared to £108 million for the whole of 2014. Guests at the seminar heard that there is still a considerable weight of money looking to invest in prime Bristol offices and with an increasingly positive sentiment towards the occupier market and predicted rental growth, Bilfinger GVA is expecting the current high levels of demand for Bristol offices to continue for this year and well into 2016.
Richard Howell, Investment Director at Bilfinger GVA in Bristol writing in the report, says, “There has been a significant shift in prime Bristol office yields in the last 12 months, with prime yields now at 5.00% compared to 5.75% at the same time last year. The two notable transactions so far in 2016 at 66 Queen Square in July 2015 for £32.7 million, and Temple Back in June for £58.5 million have contributed to the Bristol office market looking an attractive investment opportunity as investors continue to eye the regional markets.”
Jo Davis, Regional Senior Director at Bilfinger GVA told the audience, “Bristol is one of the most important economic centres in the UK. A product of this success sees Bristol as the only city in the UK with a decreasing aging population, acting as a magnet for young professionals. In response Bristol’s population is forecast to see strong growth, with a rise of circa 40,000 expected over the next decade, well above the rate projected for the South West region.
“Bristol has outperformed both the South West and the UK as a whole in terms of economic growth over the last decade. It is the only English core city where output per capita outperforms the national average.”
Jo continues, “However, to continue to prosper we must see development opportunities in the city move forward in tandem with occupier and investment demand. We are at a tipping point where demand is outstripping supply which could restrict the city’s ability in the short term to capture this economic growth trajectory.”
In the Future of the Bristol Property Market report, Bilfinger GVA Director Richard Kidd talks about the regional office market:
“In Bristol, the office market has returned to more modest levels of demand with circa 400,000 sq ft let during the first half of this year. This follows an exceptional level of take-up in 2014, which totalled nearly 1.3 million sq ft. The most recent wave of speculative development in Bristol has now completed, and there is now a dearth of activity. Underlying demand for city centre space remains strong, and grade A space is rapidly diminishing, with only 185,000 sq ft now available. This is the equivalent of just one year’s average annual grade A take-up.”
Paul Hobbs, Bilfinger GVA Director within the industrial agency team adds,
“The distribution warehouse market continues to benefit from the immense structural changes still sweeping through the retail sector. There are plenty of large-scale distribution requirements across the regional markets, with retailers driving demand. Non-food retailers and particularly discount and internet retailing is particularly active. The Bristol market has followed this national trend, seeing strong take-up in the first half of 2015.
“The Bristol market has seen only limited development activity and the declining supply of high quality space over the last 12 months means there is virtually no prime standing stock available, and only one significant speculative building scheme underway.”
Looking at the residential land market, Senior Director Gordon Isgrove observes,
“The central Bristol residential market has been characterised by two elements of late; the Private Rented Sector (PRS) and Permitted Development Rights (PDR).
“We are beginning to see the results of office conversions to residential, as schemes such as Bristol Bridge House and Electricity House start to take shape. Both schemes have seen significant numbers of reservations in the first days and weeks of release, suggesting pent up small investor and owner occupier demand for city centre apartments.
“There is no doubt that PRS is an important market force at present; with institutional funds now entering the market, the competition for sites is high.”
Speakers at the Bilfinger GVA seminar, held at M Shed, included Nick Sturge, SET squared Centre Director, and Alistair Reid, Bristol City Council Service Director Economy who gave a short talk on the new Bristol arena development.
Alistair Reid says, “The arena is a long awaited, vitally important piece of cultural investment for the city region that will have a significant impact on the local economy and be a catalyst for further development. The recent acquisition of Arena Island and the derelict former sorting office site by the council is a game changer for the city. Together these two sites have the potential to transform the crucial area behind Temple Meads station and stimulate development to create a vibrant new quarter for the city.”
Nick Sturge says, “I think we are at the beginning of the most exciting boom period of growth I have seen. We need to ensure that the right location, style and flexibility of space is available as and when growing companies need it – be they home grown or relocating/investing in the city. We need to ensure the other pillars of the ecosystem are in place for businesses: funding, support and talent. At Engine Shed we are working on all those and are keen to work with the property industry on helping grow this great city-region.”