OFFICES
Things could hardly be better for Bristol offices. By the end of Q2, 520,000 sq ft had been signed for in the city centre – more space than was taken up in the whole of 2006. By the end of this year, many predict that take-up could be 900,000 sq ft.
The figures were helped by law firm Burges Salmon eventually settling its long-standing requirement. It set a new headline rent in the city of £27.50 per sq ft for a 170,000 sq ft prelet at Temple Quay Central. That rent proved to be more than a one-off when HR consultancy Watson Wyatt agreed to £27 per sq ft for 8,000 sq ft at 3 Temple Quay – a record for an existing building.
Can this continue? Take-up over the past 12 months has been bolstered by a handful of large deals. Similarly sized deals will be needed to sustain this level of activity in future.
Stockbroker Hargreaves Lansdown is believed to have made an offer for 100,000 sq ft at Harbourside. All eyes are now on the Environment Agency, which has a requirement for up to 60,000 sq ft. Ian Wills, partner at King Sturge, says it is shortlisting 16 possible buildings, and says it will commit by the end of the year.
“Where it lands will be interesting, especially bearing in mind its BREEAM excellent requirement,” says Wills.
Developers have sprung into action. Hartwell House and Portwall Place – 55,000 sq ft and 170,000 sq ft respectively – will be the only major buildings to be completed this year. The 123,000 sq ft Templeback is also on site, and Cubex should begin construction of The Paragon this year.
However, agents are asking whether HDG Mansur’s Finzels Reach scheme (pictured) on the former Courage Brewery site will move ahead.
Development director Chris Read says agreement on section 106 issues – which had held up plans – has now been reached. The developer intends to begin work by next spring on the speculative 113,000 sq ft Bridgewater House.
Read is confident about a letting. “There is a useful window for us towards the end of 2009,” he says.
However, he admits this may not be through one headline-grabbing deal. “We accepted from the start that Bristol has a particular profile, and Bridgewater House will be offered to smaller occupiers too.”
Read says a further 150,000 sq ft building will be offered on a prelet basis. He is not quoting rents on Finzels Reach, but agrees that over the next few years £30 per sq ft is attainable in Bristol. “If you told me there was a taker today for Finzels Reach, it would not be at £30 per sq ft, but we will be up there with the best,” he adds.
Agents believe there is room for growth. “Applicants are prepared to pay significantly more rent than they were just 12-18 months ago, and those that were in the market for top teens space are now considering new-build,” says Phillip Morton, director at DTZ.
Yet King Sturge’s Wills thinks there is still some way to go before the market can achieve this level. “I think the next round will quote £27 per sq ft and achieve £26 per sq ft, and then we may move to £28.50 per sq ft. We may see £30 per sq ft in two years’ time, but certainly not in the next 18 months,” he says.
INDUSTRIAL
Industrial take-up in Bristol was 2.1m sq ft last year, down by around 1m sq ft on 2005’s figures. The drop was caused by a lack of supply rather than a lack of demand, says Russell Crofts at Knight Frank’s national logistics department and chairman of the IAS Western branch. However, things may be changing.
“Last year, we saw the entrance of a lot of the big-shed guys in Bristol. St Modwen and ProLogis both arrived, and we have 1.95m sq ft coming out of the ground,” he says.
Croft adds that it would be a brave man who builds more. “Bristol’s biggest speculative shed before today was probably 100,000 sq ft and built to order was 385,000 sq ft. That is definitely changing now.”
For example, ProLogis acquired nearly 28 acres at Cabot Park, Severnside, and has speculatively started construction on a 550,000 sq ft warehouse. The move, says ProLogis’s vice-president, George Glennie, was driven by the shed giant’s recognition of the South West as a logistics hub as EU legislative restrictions on drivers’ hours bit.
ProLogis’s speculative development is an economic barometer, believes Knight Frank’s Crofts. He points to retailers who have not been active in the South West. “It is no secret that Tesco and Morrisons are each after 750,000-900,000 sq ft, and John Lewis is also in the market.”
RETAIL
The market awaits Cabot Circus. Bristol Alliance’s £500m, 1m sq ft extension to the Broadmead shopping centre opens in just over a year. A recent DTZ report said Bristol faced occupier demand for up to 2.6m sq ft of retail space and predicted that spending in the city would nearly treble to £3.6bn pa over the next 20 years.
In the meantime, paralysis has all but hit retail lettings. Zone A rents of £250 per sq ft are not expected to move this year.
Market at a glance
Out-of-town offices:
First half take-up totalled 240,000 sq ft against a quarterly average of 70,000 sq ft
Atkins signing for 100,000 sq ft at Rok’s Aztec West boosted figures. The deal set a new headline rent of £22.50 per sq ft
£20.50 per sq ft headline was set in 2003
Year-end total take-up predicted to reach 350,000 sq ft
Vacancy rate is 4.8%
150,000 sq ft under construction
City-centre offices:
Availability 12m sq ft
Vacancy rate 6.6%
334,000 sq ft under construction
Headline rent £27.50 per sq ft
£30 per sq ft predicted by 2011
Start on Finzels Reach eagerly anticipated
Industrial:
Big-shed developers have arrived in Bristol
1.95m sq ft under construction
Take-up 2.1m sq ft in 2006
Rents £7 per sq ft
Agents expect retailer activity
Retail:
Cabot Circus opens late 2008
Paralysis in market as retailers await £500m scheme
Zone A £250 per sq ft. Unlikely to rise this year
