“From 2 January 2014 it felt like the lights were switched back on in the Bristol office market,” says Knight Frank partner Martin Booth.
With Bristol’s office market running six months behind Birmingham and 12 months behind London, according to Booth, the city is now coming out of the shadow of recession and basking in the light of speculative development and increased occupier requirements.
The city centre office pipeline ground to a halt in 2011 with the completion of Bridgewater House at Finzels Reach. A subsequent shortage of space has resulted in around 160,000 sq ft of new spec development, which will hit the market in two schemes – 98,500 sq ft at Salmon Harvester and NFU Mutual’s 2 Glass Wharf at Temple Quay Central and 61,000 sq ft by Skanska at 66 Queen Square.
And the former has already netted its first tenant at a record-breaking rent. Earlier this month accountancy giant PwC pipped KPMG to go under offer on the top three floors of 2 Glass Wharf in a 30,000 sq ft deal at a rent of £28 per sq ft – if signed, the highest rent achieved in Bristol city centre since 1995. KPMG had shortlisted the building for its larger 50,000 sq ft requirement, but is now believed to be looking hard at rival 66 Queen Square instead, as well as Bridgewater House and Temple Back.
PwC will relocate from its 51,000 sq ft offices at 31 Great George Street. The reduction in space follows a review of working practices at the firm to include more hot-desking facilities. The deal is likely to sign before Christmas.
“The deal is a great testament to Salmon Harvester’s brave decision to build speculatively,” says DTZ director Andy Heath, “and should lead to a number of the occupiers who have been dipping their toes in the market over the past 24 months realising they cannot keep holding off, waiting for others to jump first.”
Simon Price, partner at Alder King, adds: “These spec office developments now look less like a carefully calculated gamble and more like a shrewd and timely prediction, based on the strength of interest in both schemes.”
But PwC and KPMG are not the only players eyeing the city centre for space. Demand comes from the professional, financial services, legal, TMT and energy sectors. There are some long-standing requirements, including Southend-based Mapfre’s 40,000 sq ft, which may land this autumn, while OVO Energy is under offer at 1 Rivergate for between 40,000 sq ft and 50,000 sq ft – pipping Mapfre to take space at the scheme.
DTZ’s Heath says: “There are more enquiries than we have seen for six to seven years, all of which could sign in the second half of 2014, making a very high yearly total.” However, he adds: “A lot of requirements have been in existence for up to three years without committing. If a number of other requirements begin to emerge, they [the longer-term requirements] will need to be careful not to get caught out.”
With circa 150,000 sq ft of grade-A space currently in lawyers’ hands, according to Hartnell Taylor Cook’s Chris Grazier, full-year figures for 2014 have already hit 1m sq ft – beating the five-year average of 709,000 sq ft in the first half of 2014 (see panel, left).
The last time Bristol saw take-up at this level was in 2008.
Phil Morton, head of agency and development (South West) at CBRE, which is advising PwC on its requirement, says: “The stats speak for themselves. We have had a greater-than-average take-up in the first half of 2014 and H2 will see more key deals land.”
With current city centre requirements totalling more than 500,000 sq ft and only 18 months of grade-A supply available, the obvious question is: who will speculatively build next – and where?
The general consensus between Bristol property folk is that Commercial Estates Group is the favourite to put a spade in the ground next, at its 200,000 sq ft Aspire site.
Chris Meredith, Savills director of office agency, tips CEG as the one to watch. “I think CEG will be one of the first to bring a spec scheme forward,” he says. “It has a good site with Aspire on Temple Street. It’s a good location, near to Temple Meads, and CEG has been actively trying to seek a prelet.”
The word is that, if CEG does go ahead, it will crack on with the project fairly quickly, with work on site potentially starting before the end of this year, adding another spotlight to shine on the Bristol office map.
Out of Town
The deal on everyone’s lips (now signed, but yet to be officially announced) is that TSB has taken the whole of CBRE Global Investor’s 64,000 sq ft Key Point scheme in Almondsbury, located at Junction 16 of the M5. The bank is said to be under offer at a rent of £16.50 per sq ft. If confirmed, the deal will be the biggest in Bristol’s office market for six years.
Key Point had originally gone under offer to French energy giant EDF Energy last year, following the proposed government-backed £16bn development of its Hinkley Point C nuclear power station near Bridgewater, Somerset. With no available office space close by, EDF was in detailed talks to take the whole building on a long-term lease at circa £17.50 per sq ft.
However, under EU law a national government cannot subsidise a private company and a continuing European Commission investigation into whether the state aid subsidies for the Hinkley development are illegal will not be fully resolved until later in the autumn, forcing EDF to postpone a decision on taking space in CBRE Global Investors’ Key Point. Hence TSB striking the deal.
CBRE is advising TSB and CBRE Global Investors.
Bristol EGi League Table by Nadia Elghamry
Bristol agents signed for more than 804,000 sq ft of space in the 12 months to the end of June. GVA stormed to the top from 10th position last year, with an average deal size more than double the city’s overall average, boosted by a 25,000 sq ft sale of Company House, Tower Hill, to Verve Properties.
But it wasn’t enough to give GVA the largest deal of the year: that went to JLL, which signed law firm Veale Wasbrough at Narrow Quay House, although it is unlikely to be 2014’s highest with PwC’s letting.
Three regional agents found their way into the league table this year. Burston Cook, at number five, signed 43 deals in the year, more than any other agent, and retained its league table position. For other local firms, though, it was a tumble down the ranks, with Alder King dropping from the top spot in 2013 to third this year, while Hartnell Taylor Cook saw its position slip from fourth to eighth.
• Click here for a full breakdown of the research on the Property in Numbers blog.
Lisa.Pilkington@estatesgazette.com
