Bristol ball gazing In the spring, agents were making some optimistic forecasts. Stacey Meadwell finds out if their predictions are coming true
When EG visited Bristol in the spring, the office market was looking fairly robust and agents were confident in their predictions. As we approach the autumn, have the forecasts come true, and will the buoyant market continue?
For rents, it was a story of growth. Rok equalled the previous best headline rent of £24.50 per sq ft when insurance underwriter QBE European took 101,000 sq ft at 3 Temple Quay in March. Agents then said rents would continue to rise, and this has proved to be the case.
A rent of £25.50 per sq ft was achieved in the spring by HBG Properties on 20,000 sq ft at Britannia on the Tower Wharf scheme. And lawyer Mewburn Ellis is believed to be about to sign for 16,000 sq ft at 16 Queen Square, which will be completed in December, at a rent of £26 per sq ft.
“Asking rents have moved beyond £26 per sq ft for good space,” says David Skinner, chairman of the South West region at CB Richard Ellis’s Bristol office.
Chris Grazier, partner at Hartnell Taylor Cook’s Bristol office, agrees: “A rent of £26 per sq ft will be established and we are guiding £27 per sq ft on the Temple Back scheme.”
GVA Grimley’s Ben O’Connor says that rents for secondhand refurbished stock are also rising, with levels of £18-£23 per sq ft commonly achieved.
Take-up is slightly down on this time last year. However, DTZ director Philip Morton believes the annual average of 500,000 sq ft will be achieved by the end of the year, even though only 200,000 sq ft of deals have been recorded so far. For this to happen, deals in the pipeline will have to be signed.
In addition to the modest Mewburn Ellis requirement, stockbroker Hargreaves Lansdowne has been in negotiations for 130,000 sq ft at Crest Nicholson’s Harbourside scheme, and law firm Burges Salmon, which has a requirement for 170,000 sq ft, has shortlisted St Mary le Port and Temple Quay Central.
Oven-ready sites
“Demand is pretty flat, but that is mainly because of the time of year, and lack of supply tends to slow the market. Prelets are difficult to sign,” says Grazier.
In the spring, agents were hoping that the shortage of supply and rising rents would encourage developers with oven-ready sites to start building and this, too, seems to be happening.
Developer Hartwell began construction of the 55,000 sq ft Hartwell House, Victoria Street, in May. And after uncertainty over when work would begin, agent Hartnell Taylor Cook says construction of UK & European’s Temple Back will start in October. Grazier says completion is scheduled for 2008.
In the meantime, there is going to be an inevitable lag.
Depending on whose figures you use, there is between 60,000 sq ft and 100,000 sq ft of grade A space available in the city centre.
“If existing stock is taken up, then we will see some more starts in the middle of next year,” says Morton.
Places tipped to emerge as office locations in the medium term are the areas adjacent to the Bristol Alliance’s Broadmead retail development.
“Tower Wharf was pioneering but, with Broadmead coming on, that area will benefit,” says Grazier. “It will be an area where there is a lot of activity in the next two to three years.”
So it looks as if the agents got it right, and the market is in reasonable shape, for the short term at least.
Out of town
However, when it comes to the out-of-town market, the predictions were wrong. Instead of an anticipated narrowing of the gap between in-town and out-of-town rents, the difference is around twice what it was in spring.
“Historically, there was only a
£2-£3 per sq ft gap between the city centre and out of town, but now it is £5 per sq ft,” says Grazier.
A shortage of space could be to blame but, with construction of more space about to start at both Bristol Business Park and Aztec West, the market is again predicting that the gap will close.
The top rent achieved this year is £20.50 per sq ft, but Bristol & England Properties is quoting £23.50 per sq ft for two buildings of 33,000 sq ft and 14,000 sq ft at Bristol Business Park.
With space relatively scarce, bringing such schemes to the market now could help them achieve the higher rents. But the proof of the pudding is in the eating, and the market will have to see if occupiers are listening to the predictions of higher rents ahead, and take a bite.
