…is another man’s floor The uncertain economy has put paid to the likelihood of oversupply in the South West. Stacey Meadwell reports
Two sides of the retail coin
Every cloud has a silver lining, although, with a recession looming, you may have to look harder to find it. In Bristol, that silver lining is a direct result of the stormy economy.
At the beginning of the year, there were three developers poised to push the button on a total of 440,000 sq ft of speculative offices in three developments. This was raising concerns about potential oversupply in a market where take-up averages around 650,000 sq ft pa.
But it is looking increasingly unlikely that all three will go ahead as planned, with the start date on at least one put back by six months.
Adam Pratt, development director at Terrace Hill, which has just received planning permission for a 53,000 sq ft scheme in the city, says: “If everyone had built what they said they were going to build, it would have been disastrous for those promoting those schemes and for the market as a whole.”
The one trophy building that is going ahead is HDG Mansur’s 110,000 sq ft Bridgewater House, which is due to be completed in March 2010. Martin Booth, partner at Knight Frank, which has just been appointed agent, says: “The market isn’t dead it’s quiet, but not dead. Headline rents are holding up and incentives are slowly creeping out.”
Generally, rent-free periods are lasting for one-and-a-half months for every year of the lease, and this is expected to become more generous as the economy enters recession.
As with elsewhere in the country, Booth believes that economic uncertainty is blowing chill winds. “I’d be silly if I didn’t say it wasn’t quiet, but there are requirements waiting,” he says. “You can’t blame companies for being cautious.”
“Tough old year”
The Bristol office market is not alone, with this sentiment echoed in many of the South West’s key commercial centres. In Truro, for example, Tim Smart, head of agency at Alder King, says: “It is going to be a tough old year. In fact, I think we are in for a tough two or three years.”
Supply of space has been creeping up, and those in the market will be closely watching what happens when the county’s local authorities start amalgamating to form One Cornwall in April. Rationalisation of duplicate departments is almost inevitable and no one would be surprised to see surplus office space come to market.
Exeter’s office market is in no danger of being oversupplied with new space, but that is not stopping developer caution. Summerfield Developments, which has a number of schemes around the M5 corridor, is in the process of completing the acquisition of Exeter Business Park.
Philip Wade, senior development surveyor for Summerfield, says that the site has planning permission for 140,000 sq ft of offices: “It is the only site available in Exeter for offices, but we will wait for prelets or presales. We have to be slightly more considered about doing any speculative development in the current market and with the empty rates tax, as you don’t want to be left with a cold.”
Likewise, in Taunton, Summerfield has what is probably the only office development opportunity at its Blackbrook Office Park. But, despite having two prelet buildings under construction and strong interest in the remaining two plots, there will be no speculative development.
Wade says: “Most of the country is feeling a bit of a pinch, but development is a long-term process and most of the market we operate in will bounce back.”
Bristol’s Cabot Circus opened in September to a fanfare and, within 11 days, had attracted itsone-millionth visitor. How many of those visitors are actually spending at the scheme is debatable, as consumers everywhere feel the pinch.
Anecdotal evidence suggests that the out-of-town shopping centre Cribbs Causeway, which sucked shoppers out of Bristol when it opened 10 years ago, has been on the receiving end of Cabot Circus’s success. However, it will take a few months to get a better picture of whether shoppers’ habits have changed in favour of the city centre in the long term.
Further along the M4 at Swindon, a 30,000 sq ft extension of the Brunel Shopping Centre is under way and due to be completed in March next year.
Meanwhile, the future of 155,000 sq ft of retail in St Austell hangs in the balance. The space is part of a mixed-used scheme being undertaken by White River Developments, a wholly owned subsidiary of David McLean Developments, with funding from the South West Regional Development Agency.
Although David McLean Developments went into administration last month, a SWRDA statement says: “White River Developments is still trading, so there does not appear to be any immediate risk to the town-centre scheme, although we continue to monitor the situation very closely.”
South West: key property statistics
Although take-up is down everywhere, rents are holding up in the main urban centres
Exeter
– Out-of-town office rents are predicted to rise by 50p to £17 per sq ft next year while in town rents remain static at £18 per sq ft
– Take-up is 146,300 sq ft at Q3 compared with 250,000 sq ft last year
– No new buildings under construction
– Take-up of industrial space at Q3 was 64,600 sq ft compared with 272,900 sq ft in 2007
– Overall availability is 366,570 sq ft and rents remain static at £6.50 per sq ft
Plymouth
– In-town and out-of-town office rents have both risen marginally to £16 per sq ft and £15.50 per sq ft respectively
– Take-up to the end of Q3 was 66,900 sq ft – against an annual average of 150,000 sq ft supply is 490,000 sq ft
– Industrial take-up at Q3 was nearly double last year’s total at 414,000 sq ft overall supply stands at 780,000 sq ft
– Rents remain static at £5.50 per sq ft
Bristol
– In-town and out-of-town office rents remain static, respectively at £27.50 per sq ft and £23.50 per sq ft
– Take-up to the end of Q3 in-town and out-of-town is 500,000 sq ft and 225,000 sq ft. Both are less than half that achieved in 2007
– Supply has increased both in town and out of town, compared with 2007
– Industrial take-up at end of Q3 was 392,341 sq ft, compared with almost 4m sq ft taken up in 2007
– Industrial rents have risen by 50p to £7.50 per sq ft and supply is over 3.5m sq ft
