Bumper take-up: The only factor holding back even greater take-up in Bristol appears to be a lack of availability.
Offices
It has already been a bumper year for Bristol office take-up, with 2006’s total surpassed by the end of Q3. Rents in the city centre have shifted upwards to £27.50 per sq ft, and quoting rents are now £28 per sq ft – a level that King Sturge Bristol’s partner in charge, Jeremy Richards, believes is achievable.
“I anticipate that £28 per sq ft may well be achieved, and then rents will plateau at £28-£29 per sq ft, but that depends on stock levels,” he says.
Most of the space in the two buildings left to be completed in the city centre this year has already been let. There will now be a pause of six to nine months before the next wave of stock comes to the market.
“The number of enquiries might not be looking as strong, with fewer big ones, but we aren’t looking at an oversupply,” says Richards.
As in the rest of the South West, investment yields have softened by half to three-quarters of a point, but there is still money for the right stock.
Industrial
Take-up has been lagging behind this year, but this is being explained away by a lack of supply rather than lack of demand. Headline rents have remained stable at £7.50 per sq ft, while freehold values are pushing £120 per sq ft.
Recognising the shortage of stock, and tempted by the rental levels, developers have responded. According to Paul Hobbs, partner at GVA Grimley, some 538,000 sq ft is expected to be delivered to the market in the next 12 months.
“Even with the loss of void rate relief, concerns over energy certification, interest rate risk and road congestion, we remain very positive about the prospects for the next 12 months in the industrial sector,” says Hobbs.
– In-town office rents are up £1.50 per sq ft to £27.50 per sq ft since last year
– Industrial rents £7.50 per sq ft (no increase on last year)
– Retail rents have risen by £10 per sq ft to £200 per sq ft since last year
Source: King Sturge, GVA Grimley, Colliers CRE
Credit crunch hits the investment market
Exeter
Exeter’s investment market, like those elsewhere in the country, was trucking along until August’s credit crunch. As Scott Rossiter of Alder King puts it: “No one came back from the summer.”
The remaining weeks of the year will be crucial in determining just how much of a “hiccup” this is.”The institutional funds are all sitting on their hands, but thereis still a lot of private money out there,” says Rossiter.
The office leasing market has also seen a slight softening, but whether this will ultimately affect rents is not yet known.
“Things have moved slightly away from landlords, with businesses taking stock, so they might have to offer more incentives,” Rossiter says.
Headline rents have grown only marginally on last year’s figure,and any growth next year will be dependent on what stockbecomes available.
There is increasing concern about the supply pipeline in the medium term as land is drying up, and the next substantial wave of development, at Sky Park to the east of Exeter, is at least two or three years away.
Take-up this year is expected to match last year’s figures.
Trade-counter space has been pushing rental growth in the industrial market, with headline levels at £7.25-£7.50 per sq ft.
But as with offices, Rossiter believes that there will be a certain amount of “taking stock” within the market.
– Office rents: £16.50 per sq ft (£16.25 per sq ft in 2006)
– Industrial trade counter:£7.25-£7.50 per sq ft (£6.50 per sq ft in 2006)
– Retail rents up £20 per sq ft to £220 per sq ft on last year
Source: Alder King, Colliers CRE
Plymouth
The Plymouth office leasing market is not exactly making headlines, but agents are not perturbed. According to Vickery Holman director Mike Oldrieve, take-up this year is expected to be on a par with previous years, and rents have nudged up by 50p-£1 per sq ft. He predicts that the top rental of £15 per sq ft could be surpassed by the end of the year.
“We keep hearing doom and gloom stories, but in the South West, I don’t see them at the moment. I’m anticipating another steady year in 2008,” he says.
All new space has been out of town, but next year the city centre will have developments that will test the market.
Yields across all sectors have moved out by a half a percentage point, but Oldrieve, at least, believes that is a good thing, seeing it as a lull rather than a crash.
– Office rents have risen by 50p-£1 per sq ft on last year to £15 per sq ft
– Retail rents have remained static at £180 per sq ft
Source: Vickery Holman, Colliers CRE
Cornwall
Truro
It has been a solid year for the Cornish capital’s property market. According to Alder King, office rents have not changed significantly, and headline rents are holding steady at around £15 per sq ft. However, one agent, at least, is confident there will be some movement next year.
“There is a shortage of supply and there are still firms looking for larger premises. I don’t think we’ll see a large rise – we won’t reach £17 per sq ft – but maybe £15.50-£16 per sq ft,” says Ian Simpson, partner at Alder King’s Truro office.
Sentiment for investment property across the county has softened, and Simpson believes yields will move out by a quarter or half a percentage point.
“There are still a lot of people looking for investment opportunities, particularly in Truro, where there is shortage of supply,” he says.
– Office rentals £15 per sq ft (no change on last year)
– Retail rents are up £10 per sq ft on last year to £145 per sq ft
Source: Alder King, Colliers CRE
