With office and industrial space at five year low, Alder King’s annual report predicts more speculative development and rental growth in 2014
Market Monitor, Alder King’s annual report into the region’s commercial property market, has revealed that the supply of office and industrial space in the South West is at its lowest level for five years. The fall in supply, combined with a marked recovery in occupier confidence, means prospects for further speculative development and rental increases in 2014 are the most optimistic since the downturn began in 2008.
After strong take up in Bristol in 2013, the total amount of office space in the city stands at 2.38 million sq ft, down from 2.55 million sq ft in 2013. Supply is expected to fall further as around 0.5 million sq ft of Bristol’s secondary offices are converted to residential use under Permitted Development Rights. The shortage of well-specified space is being addressed in central Bristol with speculative developments now underway by Skanska and Salmon Harvester which Alder King believes will push rental levels over the £27.50 per sq ft mark. Additional speculative schemes are likely to follow their lead over the coming year.
The supply of industrial space in Greater Bristol stands at 2.75 million sq ft, its lowest level for 10 years. 2013 take up at 2.2 million sq ft was lower than last year but activity was constrained by the lack of good quality supply. Alder King predicts that the coming year will see the return of design and build and more speculative industrial schemes in Bristol and, with a shortage of accommodation below 10,000 sq ft, rents could return to the 2009 level of £7.75 per sq ft.
The retail sector saw a cautious level of confidence return in the latter half of 2013. While Bristol Zone A headline rents remained stable, out of town rents have dropped to £30 per sq ft.
The South West investment market gained in strength in 2013, most notably in the final quarter, with transactions totalling £695 million. Bristol secured the lion’s share with £319 million of transactions, most notably in the out of town and city centre office market. This is significantly higher than the 2012 total of £155 million.
Simon Price, head of agency at Alder King, said: “After a positive 2013, the coming year will see more speculative office and industrial developments coming on stream across the region, with subsequent increases in headline rents and downward pressure on incentives.
“With a resurgent residential land market and strengthening investor confidence in the regions, the coming year should see activity in the commercial property market return to pre-recession levels.”
Alder King’s Market Monitor 2014 provides a summary of the commercial property market in Bristol, Swindon, Gloucester, Bath, Taunton, Yeovil, Exeter, Plymouth and Truro. It also covers Newport, Cardiff and Swansea in South Wales. The full report is available to download at www.alderking.com/publications. A mid-year update will be published in July 2014.
