With the potential for 1 million sq ft of available office stock in Bristol city centre expected to be converted into housing over the next two years, a leading city property adviser is predicting a rise in rental values in the office market as a result.
Richard Kidd, Director of Office Agency at GVA in Bristol, says that, with around 50% of the existing available stock possibly being taken out of the market for residential use following the introduction of changes to permitted development rights, office rental values could rise as the available supply shrinks.
He explains: “While a fair proportion of the properties that have had planning consent already applied for are currently vacant, and in some instances are far better suited to residential than they are to office use, some buildings are being taken out of the market that have existing tenants and, with the right investment, might otherwise be an asset to the office market in the city. Thus, as confidence begins to return to the market, we could be facing a potential shortage of second-hand office stock.”
With the aim of increasing housing supply, landlords and developers are able to benefit from relaxed planning regulations if they are putting empty commercial properties back into productive use as homes. The three-year scheme came into force in May 2013, with further relaxations to permitted development coming into effect from 6 April this year.
A number of older office properties in Bristol are also being converted to student accommodation, such as Froomsgate House, but these fall outside of the PDR scheme. A total of 45 proposals have been made to Bristol City Council to convert offices to residential, a trend that hasn’t been seen to such an extent in any other city in the West.
Richard says: “We are seeing a similar trend within the M25, however, Bristol is the only town or city in the West where this is happening on such a scale. From both investor sentiment and signs of the return of occupier demand, we are seeing a renewed confidence in the market. With two speculative developments under construction in the city, there’s still limited demand for Grade A space at the top end of the market, however, the dramatic reduction in supply of second hand space through the PDR scheme will soon begin to have an effect, particularly when tenants in affected properties need to relocate.”
Richard highlights that investors willing to take the risk may therefore reap medium to long term value in refurbishing second-hand office buildings with the right fundamentals and in good locations rather than converting to residential. He points to Ignis Asset Management, which has recently invested £1.5 million in creating high quality refurbished offices in the former Venturers House, now renamed 25 King Street, and to the Brewhouse, where Verve Properties are currently redeveloping the former Company House on Jacob Street.
