Market snapshot

Office Market Pulse Bristol Q3 2015

The Bristol office market experienced slow take-up in Q3 2015 in a continuation of the trend seen over this year. However, an increase in enquiries suggests a strong final quarter and robust start to 2016.

The main issue within the market continues to be a lack of available stock across all grades and where new space will come from. A large amount of lower grade stock has been taken from the market due to permitted development rights (PDR) and this, in turn, has led to a narrowing market for occupiers.

Grade A stock is running low and a lack of new development means that there is an increasingly limited choice for occupiers. Landlords have the advantage, and as a result, are reducing incentives and increasing prime rents.

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In this issue:

Enquiries on the rise after slow summer period

  • There were 47 new office enquiries (over 5,000 sq ft) in Q3 2015 which is a large increase on the previous quarter
  • We have also seen an increased number of requirements below the 5,000 sq ft limit, often for lower grade space
  • This increase in enquiries is expected after the quiet summer period evident last quarter, and we are seeing a large variety of enquiries in terms of size, specification and sector.  
  • The improving economy means that many firms are now looking to expand into larger and improved space.

Take-up falters due to lack of available stock

  • Total take-up of offices (over 1,000 sq ft) in Q3 2015 was 195,803 sq ft, compared with 258,348 sq ft in the same period in 2014
  • Total take-up in 2015 so far is 594,887 sq ft, compared to 773,650 sq ft at the end of Q2 2014 – a continued decrease of 23% year on year
Both the city centre and out of town markets have seen a fall in take-up when compared to the same period last year. Demand continues to be affected by a record number of deals at the end of 2014. The out of town market has suffered the most, with just 64,641 sq ft being taken up, compared with 118,075 sq ft for the same period last year.

In the city centre market, just 10% of take-up in Q3 2015 was grade A, whilst the majority (72%) was grade B. The level of grade A take-up has continued to fall since last quarter and due to a lack of available stock, we do not expect these levels of take-up to increase until further stock is developed.

Supply continues to shrink

Total office supply in the Greater Bristol market at the end of Q3 2015 stands at 1.3m sq ft, which is just less than 2 years worth, when using a five yearly average take-up figure.    

2015 has not seen any new developments come to the market. There are a number of development sites available; however, investors are reluctant to start construction without a pre-let for at least part of the space.

Several office buildings have been refurbished in recent months, which has helped improve the quality of available stock. However, there is a demand for grade A stock which can only be met through new builds.

Significant Bristol office transactions

Size (sq ft) 
Rent/price (sq ft) 
First Floor Spectrum 14,494 Civica £17.00 15 years HJ Commercial Plc
7th Floor, Castlemead 7,691 TMP £17.50 5 years Regional Properties Ltd
Second Floor, 740 Aztec West 12,831 Northgate £21.00 10 years Private investor
Part Second Floor, Aztec Centre
9,984 EE £17.00 7 years Aztec Centre 2 LLP

Investment market set for strong finish to 2015

  • The value of investments transacted in the south west during Q3 2015 totalled circa £303 million which reflected a 4% decrease on the five year quarterly average.
  • The value of sales for the quarter was, however, 14% lower than in the second quarter of the year.
  • This took total investment in 2015 to date to just over £1.27 billion, 32% above the same period last year (0.97bn), putting the market well on track to exceed last year’s total of £1.48 billion.

Demand for office investment opportunities in the principal region remains solid, driven by the continuing strength of the south west market; of this, Bristol remains the dominant centre.

An increasing number of office buildings in the city came to market during Q3 2015 with a number now close to completion.  It is therefore anticipated that the value of transactions in Q4 will be substantially higher than Q3. This is likely to result in the strongest yearly performance since pre-recession.

A healthy level of occupational demand, combined with a shortage of Grade A space, has provided a strong platform for rental performance.  This has been further aided by the substantial amount of secondary office space that has come out of the supply chain to be converted into private residential or student schemes. 

These fundamentals have attracted a large number of funds, overseas investors and property companies ready to compete for buildings that have been brought to market in Bristol.  With no pre-let or speculative new schemes coming out of the ground at this point, it is likely that this demand will continue to rise.

With the market being so robust, an increasing number of investors are considering other major south west towns and cities such as Bath and Exeter.  This should have a positive effect on yields in these locations where, until recently, there has been a marked yield shift.

Key investment deals

  • St Mary-le Port, a well located site at the junction of Wine Street and Broad Street, comprises the multi-let Prudential building of 67,294 sq ft, Bank House (33,291 sq ft) and the former Bank of England Building (29,199 sq ft). The latter two buildings sit on a site of 0.75 acres and lend themselves well to a substantial redevelopment.  The site was purchased by Goodman for £23.65 million.
  • 27/29 Great George Street, which comprises a multi-let Georgian office building of 20,815 sq ft, was bought by Threadneedle for £6.52 million, reflecting a net initial yield of 5.80%.
  • West One, Deanery Road, which comprises a grade A building of 30,800 sq ft, was let to Triodos Bank (with the exception of a lower ground floor suite of 3,875 sq ft) by way of a lease expiring in 2025.  The building was bought by the tenants for £11 million, reflecting a yield of 5.92%. The property is Bristol’s only BREEAM ‘excellent’ rated building.
  • The freehold of Brunel House, St Georges Road, has been sold for £9 million. Unite purchased the property for its own occupation.

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Peter Musgrove

0117 914 2013

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Peter Musgrove
Director - Head of Office - Bristol

0117 914 2013

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