The West Country In My View - Roxine Foster BSc (Hons) MRICS Lambert Smith Hampton Director - Office Advisory
Against a backdrop of below average take-up through 2023, the standout trend for flight to quality continued and we don’t see this changing anytime soon. Growing demand for strong ESG credentials, energy efficiency and concerted efforts to attract staff into the office have driven demand for high quality workspace. So, whilst businesses are adjusting to changes in work patterns (and a want to be back in the often more often) they may be downsizing, they are certainly upgrading the spec of their office space and choosing quality over quantity.
Examples of where tenants have focused on upgrading their space can be seen in Evelyn & Partner’s and HSBC deciding to take space in EQ, DLUP’s move to Neighbourhood and DAC Beechcroft’s recent announcement that they have committed to take space at Welcome Building.
Tenants are still taking time to make decisions, which leads to slower transactions, and this paired with a lack of larger deals in 2023 contributed to the lower levels of take up. However, we saw an increase in requirements of 10,000sq ft + at the end of 2023, and more already this year, so as these requirements convert into deals, we anticipate better levels of take up for the year ahead.
The underlying level of supply in the market has remained broadly unchanged at a relatively low level over the past year, with circa 26% of supply being grade A space. A healthy choice of grade A options
is preferable in the current market, especially amid concerns over accelerated obsolescence for secondary space emerging in the wake of the pandemic.
New developments are being brought forward at CEG’s EQ, AXA / Bell Hammer’s Assembly and Candour’s Welcome Building and these will all bring new grade A space to the market over the next 12 months. Furthermore, major refurbs that will provide space through 2024 are Credit Suisse’s 3 Rivergate, APAM’s One Friary and CEG’s Crescent.
Looking forward, the trend for better quality space is set to continue with focus on ESG and wellbeing, especially as EPC requirements change and will enforce that buildings are meeting minimum standards, not just tenants expectations. As part of this tenants will continue to look at other well being aspects such as CycleScore, WELL rating, BREEAM, Naybers and WiredScore.
Despite lower levels of demand, a low level of supply and the continued trend for best in class space means that prime headline rents have not only proven resilient in a difficult market but have in fact increased to over £45.00psf for new build space. In addition to new buildings seeing increased rents the market for very high quality refurbishments has also prospered and comprehensive refurbishments are achieving in excess of £40.00psf to set a new tone for the city centre.
However, the result of a flight to quality has meant that poorer grade space has fallen to the wayside and will struggle moving forwards, especially as EPC requirements come into play. This will likely lead to the lower rated buildings being taken out of the market for alternative uses, which will further impact the lower end of the market.
Bristol and Bath Show Great Potential
Bristol and Bath continue to show great potential as a region that national and global investors become ever more interested in Reports Andy Heath CSquared.
Recent reports from various different consultants including the likes of EY point to Bristol as being the best place to invest into, alongside Manchester outside of London over the next 10 years. The drivers behind this are the powerful business sectors that drive the regional economy, namely digital and Fintech, engineering, finance and the rapidly growing life science world. We have 4 major universities which collectively have more student numbers than Manchester and one of the highest graduate retentions as a region anywhere in the UK. Added to the fact Bristol has been named on numerous occasions in the past 10 years as one of the best cities to live in the UK by The Times, its proximity to London and ease of getting there (when flooding doesn’t occur!), its why many business’ look to the region to either expand or relocate. This is why the region has one of the highest rates of rental growth in the UK.
However,
must seize this potential and
opportunity
the region it
has
as it may not occur again in our generation. There are challenges such as the planning system, the cost of housing relative to the rest of the regions and local transport but these are not issues singular to us and those with vested interests in our region and communities must look to overcome these problems and present a positive and united front.
Clearly, like everywhere at present, Bristol and Bath has a limited development pipeline due to the cost of finance and construction, plus the uncertain investment markets. This will lead to supply pressures over the next 12-36 months and we are already witnessing occupiers testing the markets who don’t have a lease event for another 4-6 years as they foresee the shortage coming down the line. These factors will all contribute to even greater rental growth over the next few years with rents due to break £50psf. Build to rent (BTR) and student accommodation remains extremely strong with limited supply of both and the industrial sector continues to perform well.
CSquared is a regional business with offices in Bristol and Bath with a satellite office in London and a headcount of over 30 and growing quickly. We cover all the main business lines within property and offer partner led, specialist advice in all areas. We have a deep rooted knowledge of our markets and are instructed on some the largest schemes in the region and by some of the highest profile occupiers.
https://www.cs-re.co.uk/about/
COMMERCIAL PROPERTY MONTHLY 2024
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