Strong demand for premises of less than 5,000 sq ft in and around Bristol has seen the small office sector defy market trends and significantly outperform the equivalent corporate sector.
Analysts at Colliers International’s Bristol office reported high levels of take up of small units in Bristol City Centre and out of town locations.
James Preece, Associate Director at Colliers International’s Bristol office, said smaller businesses were taking advantage of high stock levels to extract maximum value from their office bases.
He said: “There are a great many smaller offices available in the current market and small firms are taking advantage of the good deals to be had and thinking it might be a good time to move.”
“Some occupiers are coming out of serviced offices and setting up on their own in smaller units giving them more control over their costs.”
Smaller firms also have the advantage of working within shorter lease terms giving them greater flexibility to react to challenging market conditions.
There was a 75 per cent improvement in space let in the 1,000-3,000 sq ft bracket in the City Centre. Out of town performance mirrored the City Centre picture with take up under 5,000 sq ft up by 26 per cent.
The smaller office sector was one of the brighter spots in Colliers’ mid-term report on office take up in the greater Bristol area.
The figures showed strong demand for prime office space in Bristol City Centre at the start of the year faltered in the second quarter.
The bright start saw City Centre take up on par with 2010, but the out of town market has struggled, with a pronounced lack of larger transactions. After the strong first quarter, total take-up in the second quarter (in and out of town) fell by 31 per cent to just under 160,000 sq ft.
James Preece said the figures demonstrated continued uncertainty in a challenging market. He said: “The prime offices sector continues to take two steps forward and one step back with an initial surge in confidence at the beginning of the year tending to fade toward the summer.”
City Centre take-up in the second quarter totalled 81,725 sq ft, down by 49 per cent on the previous quarter, but up 18 per cent on the same quarter of 2010. The second quarter saw just two transactions over 10,000 sq ft as opposed to four in the first, totalling just under 75,000 sq ft.
James Preece said better quality buildings had performed relatively well as they had in 2010, but predicted the marked lack of supply going forward may boost the take-up of some of the large amount of Grade B stock currently available.
He said: “It’s clear landlords who are able to refurbish their accommodation are seeing the most movement.”
The largest transaction in the City Centre during the second quarter saw the Triodos Bank let 27,221 sq ft at Westmarks’ West One in Deanery Road. The Triodos deal was the only grade A letting in the City Centre this quarter, compared to three in the first quarter.
Grade A quoting rents remain static at £27-£28 per square foot with deals being agreed marginally below these levels and with significant incentives (up to 3 months per year of term certain) Good Grade B still sits at £18-£20 psf with poorer Grade B static at around £10 psf. Demand remains diverse but the financial sector was relatively dominant during the first half of 2011.
Out of town take-up totalled 77,883 sq ft in the second quarter, up 8 per cent on the previous quarter, but down by 35 per cent on the same quarter of 2010. Grade A lettings made up 27,823 sq ft (36 per cent) of the total and included the largest letting of the quarter to Brightside Group at Lysander House (18,796 sq ft) plus three lettings at Brabazon Office Park, Filton.
Compared with the first half of 2010, take-up out of town is 40 per cent lower. This was mainly due to a lack of transactions above 15,000 sq ft.