Occupier appetite for the best office, retail and industrial space in the South West should ensure that the region’s commercial property market will weather economic uncertainty, according to property consultant Carter Jonas.
In its Spring 2023 Commercial Edge outlook for the Bristol and Bath property markets, Carter Jonas found that both cities have strong fundamentals and business demand remains strong.
Annual office take-up in Bristol’s city centre office market was up 5% in 2022 compared to the previous year, with 620,000 sq ft of deals. The out-of-town market also fared well with take up hitting 340,000 sq ft, 12% above the average for the previous 10 years.
Key transactions over the last 12 months include the pre-let of 54,767 sq ft at CEG’s EQ to
Paymentsense and Deloitte’s pre-let of 22,500 sq ft at Cubex’s Halo at Finzels Reach. A wave of new developments and refurbishments are helping meet occupier demand for quality energy efficient space and prime city centre headline rents have risen to £42.50 per sq ft. Out of town, a lack of available stock has also driven rents to increase from £23 to £28.50 per sq ft.
In Bath, office take up in 2022 was 62,700 sq ft, more than 40,000 sq ft down on the 10-year average. Yet schemes like Bath Quays are setting a new quality benchmark and have helped boost prime office rents to £36 per sq ft. Although the majority of deals are below 5,000 sq ft, Bath has attracted a series of larger lettings including IDH taking 7,200 sq ft at Frome Road and Fidelius taking 9,546 sq ft and 5,866 sq ft respectively at 1 Bath Quays.
Meanwhile, retailer demand in both cities remains robust in the face of the cost of living crisis, with particularly strong interest from independents, food and beverage, and leisure operators.
In Bristol, uncertainty continues in the face of redevelopment proposals. Retailers are keeping a keen eye on LaSalle’s plans to repurpose Galleries Shopping Centre, Hammerson’s proposals for some of its key assets and AEW’s strategy for former Debenhams and M&S stores. Meanwhile, suburban locations like Clifton Village and Wapping Wharf are still performing well.
Bath’s resilient retail market continues to fly in the face of market headwinds. 2022 saw a record number of retail lettings. Independents remain very active, whilst national brands also have the city on their radar. Operators like Monsoon and Mint Velvet have recently agreed to take space, with Zara also rumoured to be moving into the SouthGate centre.
Unlike most centres, Bath has a shortage of suitable retail stock, leading to upward pressure on rental levels.
2022 also saw a robust performance from the region’s industrial market. Carter Jonas research shows that Bristol take up totalled almost 2.4 million sq ft, only just below 2021. The logistics sector continues to drive demand thanks to evolving retail supply chains. Supply remains constricted which has seen prime industrial headline rents rise by 16% over the past five years to £9.00 psf.
In Bath, supply remains incredibly tight but where space is available, demand is strong with headline rents at £13.00 per sq ft. Key transactions include Furniture Box and Huboo each taking circa 100,000 sq ft at St Modwen’s Chippenham Gateway development at Junction 17 of the M4 motorway.
“The property fundamentals in Bristol and Bath remain strong befitting the economic standing and enterprise culture of the cities. That is not to say that significant changes that lie ahead, will not be challenging,” said Andrew Hardwick, Carter Jonas Partner in the Bristol office.
2023 will prove a challenging year for all commercial property sectors. Yet robust occupier appetite and quality product mean that the South West is well poised to meet the challenges ahead.
