Bristol city centre office take-up has plummeted 17% during the first three quarters of this year compared to the same period in 2005, according to a new report by Knight Frank.
The agent says the city has suffered from an absence of large pre-lets with just two deals of more than 20,000 sq ft having been completed this year.
Knight Frank’s annual Bristol Market Activity report forecasts total take-up will reach 520,000 sq ft this year, significantly below the annual average of 670,000 sq ft.
The report adds, however, that there remain a number of outstanding large requirements, such as legal firm Burges Salmon’s requirement for 150,000 sq ft and two 90,000 sq ft requirements for stockbroker Hargreaves Lansdown and the Environment Agency.
Despite the slump in activity, quoting rents have risen 10% this year to £26.50 and are forecast to reach £27 per sq ft when new stock comes to the market next year.
“The market fundamentals in Bristol city centre are positive for landlords, with steady demand levels for good quality space coupled with little ongoing speculative development,” states the report.
“There is sufficient demand to justify further city centre speculative development commencing in 2007.
“However, should a number of developers commence large scale development within the next six months, they will need to ensure that the product brought forward is sufficiently different in both unit size and completion date to avoid oversupply.”
John Sisman, head of investment and commercial at Knight Frank’s Bristol office, said that several notable deals have ensured that prime office yields are now at sub-5%.
The year’s largest transaction was the purchase of the 320,000 sq ft AXA Sun Life headquarters in Parkway by PRUPIM, which was sold for circa £140m, an investment record for the city.
Meanwhile, take up within Bristol’s out-of-town office market remains healthy. Over the last five years, average annual take-up has risen to 377,000 sq ft and, at the end of September 2006, total take-up for the year stood at 212,000 sq ft.
Continuing demand indicates that the year-end figure will be circa 300,000 sq ft, in line with the long-term average.
Tony Nicholas, head of the office, added: “The new research predicts a healthy future for Bristol and neighbouring areas over the coming years.
“The rise of city centre living has had a significant impact on Bristol’s leisure market, and we expect to see this continue to grow and improve with schemes such as Harbourside, Broadmead, Broad Quay and St Mary le Port.
“It’s an extremely exciting time for the city in every aspect, but Bristol cannot afford to be complacent particularly in attracting high quality inward investment and new jobs, as other major UK cities have raised their game in this respect.”
References: EGi News 01/11/06
