GVA’s quarterly update of regional office activity, The Big Nine, reports that 2017 has been another strong year for the Bristol office market, with city centre take-up totalling 614,000 sq ft, just over the five-year average.
In the out-of-town business parks market a stand-out pre-let deal to Babcock at Bristol Business Park contributed to take-up significantly beating the five-year average by 29%.
The city centre market was characterised throughout 2017 by a large number of smaller deals, the most significant of which was the sale of Augustine’s Courtyard by Schroder Property Investment Management to the University of Bristol at 32,000 sq ft.
However, Richard Kidd of GVA is warning that Bristol’s growth as a widely respected city for business will be jeopardised unless more space is found for development of Grade A space.
He said: “Currently the 95,000 sq ft Aurora at Finzels Reach is the only building under construction. Imminent deals are expected to leave just one floor vacant at practical completion, demonstrating continued strong demand for Grade A space in the city.
“The lack of such stock in the city centre has seen headline rents move from £28.50 to a record £32.50 psf over the year and strong headline rental growth is expected again in 2018.
“With a severe lack of development land coming forward, and the conversion of much of the city’s secondary space to residential and student accommodation, we are facing an imminent shortage of stock that will limit our opportunities to attract major employers to the city over the next decade.”
GVA expects deals to the public sector and co-working office space to continue to outperform throughout the UK.
The Government is committed to moving still more civil service jobs away from London, with these Government Property Unit deals contributing a critical mass to place making schemes that are increasingly retaining talent and reinvigorating city centres.
Bristol is not alone in its shortage of Grade A space however. The level of current Grade A supply has been tight in the regional markets over the past three years and currently stands at an average of 10 months, based on past average Grade A demand.
Low levels are particularly acute in Glasgow and Liverpool, as well as Bristol. While there is a further nine months of speculative supply under construction throughout the UK, two-thirds of this is in Birmingham and Manchester.
The out-of-town market in Bristol experienced a strong year of take-up in 2017 at 425,295 sq ft, 29% above the five-year average.
With the diminishing choice in the city centre, this performance could continue, particularly as high-quality refurbishments such as at 600 Aztec West, 800 Aztec West and Great Park Court, Almondsbury, will all complete during 2018.
The 85,790 sq ft deal to Babcock at 100 Bristol Business Park was the largest out-of-town deal recorded in 2017 within the Big Nine Report by a considerable margin, contributing to Bristol’s Q4 take-up of 142,063 sq ft, 79% increase on the five-year quarterly average.
This was the stand-out deal across the nine centres recorded in the Big Nine report. Out-of-town headline rents stand at £21.00 per sq ft.
Nationally, 2017 saw another strong final quarter and a record year across the Big Nine city centre and out-of-town markets. Total take-up for the year amounted to over 10 million sq ft for the first time.