Occupier confidence across the Big Nine office markets has reached its highest level since the pandemic started, which is reflected in the strongest take-up for two years, according to Avison Young’s latest Big Nine Office Report.
In Bristol, office activity has been headlined in Q3 by positive take-up in the out-of-town market and some key flexible workspace deals in the city centre.
Total take-up in both markets for the year to Q3 of 478,000 sq ft is someway short of the ten-year average of 620,000 sq ft for the same period. However, Avison Young expects a strong finish to the year with a number of large deals including at least two over 50,000 sq ft due to take place in Q4.
The largest deal of the quarter was in the out-of-town market, with the letting of 26,823 sq ft to the Nuclear Decommissioning Authority at Key Point. There were also three 5,000 sq ft lettings, including to Guinness Partnership at 2530 Aztec West.
Paul Williams, Director, Avison Young, observes,
“Similar to other cities, activity in the flexible workspace sector is picking up, accounting for the two largest deals in the city centre. Runway East took 15,089 sq ft at 101 Victoria Street and DeskLodge took 11,797 sq ft at One Castlepark.
“In fact, nationally, a post-Covid focus on flexibility is underpinning a rise in demand from flexible workspace providers and driving the proliferation of Cat A+, plug and play space.”
The demand for quality space continues and buildings under construction are receiving keen interest. CEG’s 184,000 sq ft EQ development and the next phase of Assembly, 120,000 sq ft Assembly B&C are due to complete in 2023, while 1 Portwall Square and Halo at Finzels Reach, are both due to complete later this year.
In terms of current supply, the vacancy rate for Bristol city centre has increased from a cyclical low of 3.1% pre-pandemic to 6% this quarter but remains low in historic terms and compares to a cyclical high of 12% in 2012. With space coming back to the market, there is an opportunity for landlords to improve accommodation, particularly to satisfy occupiers’ ESG agendas. Significant refurbishments underway include 70,000 sq ft Tower House and the 96,000 sq ft Crescent Centre.
City centre headline rents have increased from £35.50 at the end of 2020 to £38.50 in Q2. They remain at this level, but further rental growth is predicted by the end of the year with at least one significant letting close to agreement in excess of £40.00 per sq ft.
Across the UK Avison Young is reporting increasing occupier confidence, releasing pent-up demand and requirements that have been on hold during the past 18 months. Take-up across the Big Nine cities amounted to 2.3 million sq ft across both the city centre and out-of-town markets, 11% up on the ten-year average. Out-of-town activity amounted to the strongest quarter for three years, at 45% of all take-up, more than a million sq ft.
Confidence in the regional office investment market also remains robust with activity over the past 15 months performing above the long-term average – a strong performance given the recent conditions. Total investment volumes during Q3 amounted to £753 million, 26% up on the ten-year average of £599 million. Volumes over the year to date have been led by Manchester at £463 million, followed by Bristol (£361m) and Birmingham (£296m).
Richard Howell, Principal, Avison Young in Bristol says, “There continues to be a considerable weight of money looking to invest in the regional office market, and Q4 is expected to be the strongest quarter of the year, particularly given the slow start to 2021.”
