Leading commercial property experts in the region are predicting that the office and commercial property market will enjoy a similar rise to that already being witnessed in the residential sector.
After years of depressed demand and limited speculative building the consensus appears to be – in Bristol at least – that now is the time for development to commence.
With office and industrial space in the city at a five-year low, Alder King predicts more speculative development and rental growth in 2014.
Market Monitor, its annual report into the region’s commercial property market, suggests 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. It believes this will push rental levels over the £27.50 per sq ft mark. The supply of industrial space in Greater Bristol stands at 2.75 million sq ft, its lowest level for 10 years. Alder King predicts that the coming year will see the return of design and build and more speculative industrial schemes in Bristol.
Meanwhile Bristol’s increasing city-centre population is set to change the face of the city over the course of the next two years, according to leading property advisors Jones Lang LaSalle.
Research for its South West Market Review Guide to the Urban Jungle predicts an estimated 1,500 new apartments will be built across the South West during 2014 and 2015, plus 3,000 new student beds in Bristol alone, which is going to have a major impact on how the city centre develops. Bristol is behind only Manchester and Birmingham in terms of a rapid rise in city-centre population, with a 30 per cent increase in the last 10 years. This is part of a global trend. More than half of the world’s population now live in cities (51 per cent) compared to 30 per cent in the 1950s. That figure is predicted to rise to over 70 per cent by 2050.
Much of this growing city centre population will be made up of students and young professionals. This shift represents a renaissance for Bristol city centre with a significant rise in services and outlets that serve this community, such as bars, restaurants and convenience stores.
Outside of Bristol the return of speculative development is likely to be a little slower, but nevertheless business is being done.
Commercial property consultancy Myddelton & Major reported this month that it has done ten separate deals on Commerce Park, in the trendy Somerset town of Frome.
Philip Holford, who is a partner at Salisbury-based Myddelton & Major, said: “This series of deals is more evidence that the economy is on the up. Owner-occupiers who have bought their own units now have the security to grow and prosper, while the number of units bought as investments shows that confidence is returning to the market.”
In Gloucestershire one of the bigger acquisitions of 2013 was St George’s House in Bayshill Road, Cheltenham for Pegasus Life, part of Oak Tree Capital. Noyes Lewis Commercial Property was the agent for the deal, which will see the 56,500 sq ft, former Kraft Food head office turned into retirement apartments.
Bath is also seeing an improved picture, with the number of businesses needing new offices in the city dramatically increasing in the last 12 months according to recent research. The latest Carter Jonas research report on commercial property in the city showed there was a 39 per cent increase in the amount of office space taken in 2013, compared to 2011.
The two biggest relocations for the year were Bath solicitors Withy King to Midland Bridge House and high-tech engineers Altran to St Lawrence Court, SouthGate.
“The purchase indicates strengthening confidence in this sector and is perfect for this type of development,” said Simon Noyes-Lewis, who established his company in 2007 and has seen year-on-year growth.
“The last few years have been challenging and the economy has been in poor shape, but now we are starting to see genuine confidence returning from entrepreneurs, industrialists, professionals and importantly, the banks. It looks like we are beginning to turn the corner.”
Noyes Lewis completed a range of transactions in 2013, including the acquisition of 16,000 sq ft of industrial space for Edgewest Plastics in Tewkesbury, the acquisition of 4,500 sq ft of office and storage space in Andoversford for The Lucky Onion (owners of the recently opened Hotel at 131 Promenade) and the sale of Novellini House, 26,300 sq ft of office and storage space at The Orchard Trading Estate near Tewkesbury.
Other transactions included the letting of Unit 5505 Tewkesbury Business Park to DB Systems, new offices for Tayabali-Tomlin in Imperial Square, Cheltenham, a new head office for Harbour Key in Bath Road and the letting of 9,500 sq ft of industrial space in Permali Park, Gloucester to Direct on line Services.
Mr Noyes-Lewis said: “Whilst demand for commercial property has improved, there is still an air of caution and it may still be a while before we see the market forge ahead again.”