How is the Bristol office market holding up against the Brexit headwinds?

City of Bristol skyline

City of Bristol skyline

You can always tell how a city is progressing by the number of cranes you can see in its skyline. Bristol is a city that has changed irrevocably in the last twenty years – culturally, aesthetically, and in its ambition.

It’s now considered a serious UK player in the commercial property sector, and one that has the ear of investors further afield in Europe and beyond.

A barometer for its success is how active its office market is.

Ian Wills, Real Estate Director at JLL, comments on how this part of the market is progressing in the current climate: “Take-up numbers have been strong and above average in Bristol. Out of town, it has been in line with the five-year average for take up figures. One might expect post-EU Referendum take up to dip but it hasn’t happened.

“The quantity of calls and the square footage of enquiries on our system every quarter is absolutely consistent with previous years and it hasn’t dipped post-Brexit at all.

“In truth, it feels a bit odd, but the market seems to be performing very well. This year will be in line with the take up average – which is about 600,000 sq. ft.”

2016 was a bumper year, largely due to the fact that HMRC took up a 107,00 sq. ft office at 3 Glass Wharf. This pushed the take-up figures for Bristol to almost record levels.

In the first nine months of the year, a total of 441,000 sq. ft was bought in Bristol, compared with last year’s 490,000 sq. ft. However, the total average for an entire year within Bristol is 604,000 sq. ft. With Ian predicting a strong end to 2017, Bristol should reach its annual average.

Ian Wills, Jll

Challenges

So, what are the main challenges that the Bristol office market is facing?

Ian explains: “One of the main challenges is that decision-making has taken a lot longer in certain deals. There is a lot of scrutiny needed when agreeing a deal but when you get it into solicitors hands it takes even longer. I get the sense that there is a lot more caution around sign-offs.

“There is also a lack of supply. We are running out of space. Every quarter we are not building space, but we are letting it. Vacancy levels are at their lowest for 40 or 50 years, so the biggest challenge facing us is supply.”

Lack of Grade A offices

Peter Musgrove, Director and Head of Office at LSH concurs with Ian’s assessment on the challenges facing Bristol: “In terms of the city centre, the main challenge has been the lack of stock. We have a shortage of Grade A space. Tenants often have to wait to see what becomes available in a year’s time.

“Tenants who did that a year ago have realised that there is now even less space available. There is no speculative building happening and this has led secondary market rents to shoot up in price.”

The technology sector is one of the fastest growing in the region and a lack of office space is providing a challenge to some companies operating within it.

Musgrove comments: “We are the second biggest growth area for tech companies outside of London.

“The challenge has been providing the right accommodation for them.”

In recent years, many of these tech companies have taken space in shared office spaces which, in turn, have become a prominent part of the commercial property scene.

Paintworks and the Engine Shed have become important parts of the Bristol business community, however with space drying up at these locations – it is becoming a challenge for businesses in the area to grow.

Peter Musgrove, LSH

What’s next?

Going forward, the next 12 to 18 months will test the resolve of the market. With only Aurora, One Cathedral, Tower Wharf, and a few smaller developments underway, what does the future hold?

Ian explains: “We do not see demand slowing up. It has been robust for two years and despite recent political turmoil, it hasn’t slowed down. Demand will not slow within Bristol and the South West region.

“There are still some sites where we might see some developments. If they become available that will be very good for everyone.”

Peter predicts that, in 2018, the market will struggle but not due to the level of demand in the region: “There will not be a lot of stock next year. Nothing is coming forward. Statistically, it will be a bad year next year in the city centre. However, I think that hides the real story, which is that there is a healthy level of demand.

“There are a lot of companies looking for space. There are no supply levels – particularly in the Grade A market. Bigger companies have not got the space to come into the city of Bristol.

“The problem will be when a company looking for 40,000-70,000 sq ft wants to put Bristol on a shortlist of cities and move within six months – we just cannot do this. For a city of our size, this issue is very worrying. It is an inherently good market and we need people to build to bring that forward.

“Bristol is still the prime location to build something. The problem is that it takes two years to build anything and that is not going to help next year’s’ stats.”

Bridgwater Gateway

Bridgwater Gateway review

The £150m development at Bridgwater Gateway at junction 24 of the M5 is set to be one of the largest Grade A business parks to be built in the region.

Bridgwater Gateway is set out over a 100-acre area with self-contained office buildings from 6,222 sq ft upwards.

Phil Wade, Development Manager at Katmar, who are overseeing the project, summarised the last 18 months of development: “Since March of last year, we’ve been able to see the vision for a business park become a reality. This was when detailed planning permission was given for Phase 1, which comprised of 45 acres and included Grade A offices, industrial buildings and a 150 bed, 4* hotel with conferencing facilities.”

Upgrades to the nearby road system, including an update for the nearby Huntworth roundabout and along the A38 are also ongoing.

The new Phase 1 plans for the park have been released and Phil knows that they will be in a position to deliver new buildings within 12 months.

These new plots will have a prime location around the Huntworth roundabout and at the road frontage of the A38.

Office availability covers a wide range of bespoke designs and styles, with the ability to cover both large and small requirements.

Phil summarises: “There is increasing awareness that Bridgwater Gateway offers both high-specification facilities and a strategic location which provides a key gateway to the South West, along with excellent motorway connections.

“Bridgwater Gateway also benefits from proximity to Hinkley Point C, which has already created considerable demand for office space in the area and we are in an ideal position to meet that need.

“The next 12 to 18 months are likely to be even more exciting for Bridgwater Gateway than the period that has elapsed the previous year or so.”

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