The prospect of several cranes on the Bristol skyline, highlighting the creation of a new generation of office space, is surely a good thing.
So why aren’t Bristol property folk jumping for joy? Well, apparently they are not convinced that everything planned will actually go ahead. And the reason for that is that they believe demand for top-spec space is limited.
Let’s start with schemes in the pipeline. Ian Wills, director at Jones Lang LaSalle, says: “While there is 300,000 sq ft of grade A space available, only about half of that is any good. Then there is about 3m sq ft that has planning consent, but only the best locations are likely to go forward.”
The schemes tipped to come out of the ground this year can be counted on one hand, but they all have one thing in common – they are all startlingly speculative, at least in the sense that no prelets have yet been attached to any of them.
Top of the list is Salmon Harvester’s Two Glass Wharf. Rising from the ashes of a Castlemore development (and partially started by the now defunct developer), this seems to be the bookies’ favourite for making it over the completion line, by as early as next autumn. Less well-known, at least locally, is Verve Properties’ plans for phase three of its Paintworks scheme which, like Two Glass Wharf, is in Bristol’s enterprise zone.
Verve director Ashley Nicholson is not counting on EZ status though to help fill the 80,000 sq ft of office space (described by Nicholson as “more Clerkenwell than Swindon”) that will appear at the same time as 220 homes to be built by Crest Nicholson. He says that for companies to benefit most, “they either have to be start-ups (which do not tend to take new development space), be new to Bristol or show a certain amount of growth (to obtain a retrospective rebate)”. Nevertheless, construction is due to start next month, with completion 18 months later.
Speculation is mounting about a similar start to Skanska’s redevelopment of 66 Queen Square, which it bought last year for £8m, intending to deliver around 61,000 sq ft by the end of 2014.
Cecilia Fasth, executive vice-president at Skanska UK, says: “We are finalising the design of the building.” But the company refuses to be drawn on when construction will begin.
PRUPIM has avoided the nervousness about starting from scratch by deciding to instead comprehensively refurbish its One Victoria Street building, where work is already well under way on creating 47,000 sq ft of grade A space, which is due to complete this November.
“The previous layout was flawed, so the core has now been moved and some of the Bristol warehouse-style punched windows replaced with full-height glazing,” says Martin Booth, partner at joint letting agent Knight Frank.
Finding tenants for all of the above is seen by local commentators as something of a challenge.
Indigenous demand is limited and the average requirement for new space is just 30,000 sq ft. So developers, such as Commercial Estates Group managing director James Scott, who has consent for 200,000 sq ft at Aspire on Victoria Street, are looking further afield.
He says: “Our strategy is not just to target accountants and lawyers moving around the chessboard, but to focus on footloose requirements.”
He is hoping that new independent mayor George Ferguson will proactively sell the city to a wider audience.
Peter White, senior director at BNP Paribas Real Estate, wholeheartedly agrees: “Bristol is trying harder, but it has an awful long way to go before it’s in the same league as Manchester and Birmingham when it comes to attracting footloose occupiers.”
Swindon sees retail uplift
Swindon’s office market may be in the doldrums, but retail development is due to start this year both in and out of town.
Ashfield Land expects to start construction next month of its £50m Regent Circus development on a 5-acre site in the middle of the town. Anchored by a 50,000 sq ft Morrisons supermarket and six-screen Cineworld cinema, the scheme also includes 29,000 sq ft of A3 space, around 40% of which has been prelet, all of which is scheduled to open by the end of next year.
And while Ashfield begins building in-town, Henderson Global Investors and McArthur Glen plan to make a start on a £35m extension to their 207,000 sq ft Swindon Designer Outlet Centre. Work is expected to commence this September on conversion of a former railway building, the Long Shop, which will add another 50,000 sq ft of retail and up to 30 units to the 15-year-old centre. The first units are expected to open in autumn 2014, though no new tenants have yet been confirmed.
James Gregory, partner at Alder King’s Swindon office, welcomes the additional retail and leisure: “Regent Circus will inevitably lead to more people in that part of town. It will give a boost to the town centre overall and a more vibrant environment could lead to office development in time.”
Shining example – Glass Wharf
Next month, Salmon Harvester Developments is due to start construction of Two Glass Wharf, a 100,000 sq ft office building in the Temple Quarter. It is billed as Bristol’s first speculative development in four years, though purists may quibble about the definition of “development”.
The basement and ground floor slab have already been laid, a remnant from when the building was due to form part of Castlemore’s portfolio, before the Midlands’ developer went into administration and the site was purchased by Salmon in 2010.
The 0.3-acre site sits within the city’s enterprise zone, though Salmon expects the 20,000 sq ft floorplates to be filled by local professional and financial services occupiers, rather than incoming businesses, when the building is completed in October 2014. “There are a good level of emerging enquiries, helped by the fact that the level of grade A supply is at an all-time low,” says Salmon development director Rorie Henderson.
He concedes that the building is likely to be split between two or three tenants, rather than go as a single letting.
Later this year, Salmon is likely to submit fresh planning applications for its two other Bristol sites, at Three Glass Wharf (0.3 acres) and ND9 (1.3 acres), though work is unlikely to start on these until Two Glass Wharf is complete. “It’s one development at a time,” adds Henderson.
Plenty of room for conversions, but is there the will?
Do not expect a rush of conversions from offices to residential space in Bristol, when the government-backed legislation extending permitted development rights comes into force next month.
“The principle is welcome, but will be hard to deliver in practice. While there is a glut of secondary commercial space in Bristol city centre that could be converted, there is a general lack of appetite,” explains Julian Harbottle, director at Savills.
The reason for this is two-fold. First, conversions often present challenges (floor to ceiling heights, floorplate sizes, asbestos removal) that need to be dealt with before they can be turned into living space. Second, volume housebuilders rarely take on such projects, leaving them in the domain of small-to-medium-sized developers.
These firms, many of which have been wiped out by the recession, will struggle to obtain the funding required to carry out the work.
Paul Baker, head of Jones Lang LaSalle’s Bristol office, concludes: “I don’t think the government proposals will necessarily have the effect they want, and the conversions that take place are likely to be dribs and drabs.”
