Business leaders from across the West were told quality accommodation is fast becoming THE deciding factor between success or failure in the flat commercial property sector.
Around 40 West bankers and lawyers attended the first in a series of high-profile business breakfast briefings organised by Abby Pugh, Head of Valuation at Colliers International’s Bristol Office.
Analysts from industrial, office and retail departments reported the gulf between prime and secondary accommodation was widening, with quality accommodation and ‘destination experience’ demanded by business and consumer alike.
There was a danger that returns from lower grade commercial property might sink even further leaving commercial landlords with worthless stock in failing locations.
Tim Davies, head of office at Colliers International’s Broad Quay HQ, said it wasn’t all doom and gloom on the commercial property scene and pinpointed successful deals in Bristol, Avonmouth, Bridgwater and Swindon.
He said: “There are some success stories out there but it is the prime sites that are seeing the main activity in a continuingly difficult market.”
High demand for quality industrial units had helped stabilise rents but this was driven by falling supply rather than increased levels of activity.
Tim Davies said lack of new build meant there were now no buildings in the 100,000 square foot bracket anywhere in the region.
Shortages of space were obliging some firms to go for short leasehold sheds to achieve better value for money and greater operational flexibility.
Offices director Stephen Lipfriend said the story was much the same in Bristol city centre, where grade A office availability was at a very low level.
He said: “The market for top quality space is pretty good but there is a very large proportion of poorer grade B and grade C space for which there is little demand.”
This had combined to drag city centre take up down by 12 per cent and in the challenging out of town sector by 23 per cent year on year.
“However, there are spectacular deals to be done out there and if you want grade A space now is the time to go for it.”
Stephen Lipfriend outlined how the increasing gulf between Grade A and all other accommodation meant there was also considerable scope for canny commercial landlords to look at refurbishing accommodation – especially in the city centre.
“Much of the poorer Grade B stock in the centre of Bristol was built in the 60s, 70s and 80s – this problem is not quite as acute out of town where the stock tends to be fairly new,” he said.
“Revamping secondary stock could see an average rent of around £10 to £12 per square foot increased to around £16 to £18 per square foot, as well as resulting in a huge increase in capital value.”
He said the refurbishment option might be particularly effective in locations with a marked shortage of Grade A stock.
Retail director Richard Saunders said the same pattern was evident in the High Street and malls, with top ‘retail destinations’ such as Cabot Circus and The Mall at Cribbs Causeway continuing to thrive whilst Broadmead and the Galleries may suffer due to the number of available units.
This was also reflected in the South West with Bath’s high-profile Southgate centre and Exeter’s Princesshay centre proving resilient.
Richard Saunders said: “The key south west towns are continuing to do well but it is clear retailers are focusing on the large towns, cities and regional shopping centres. Secondary retail will suffer as a result of the growing trend of shopping online and the focus on large retail destinations.
“Another trend we are seeing is the daily/weekly shop which used to take place in the local town and is increasingly shifting to supermarkets. Many towns and cities no longer need the same number of shops that were once justified.”
Investment director Richard Coombs rounded off the morning contrasting Bristol’s continuing attraction within the otherwise volatile regional market.
Abby Pugh, Head of Bristol Valuation, who organised the business breakfast said she was delighted with high levels of attendance and confirmed Colliers would be organising more business updates on a regular basis.
