Demand for offices of less than 5,000 sq ft in and around Bristol has increased so far this year, defying both the wider economic gloom and the downturn in the commercial property market.
Research by property agents Colliers International’s Bristol office shows smaller businesses taking advantage of high stock levels to extract maximum value from their offices.
Associate Director James Preece said: “Some occupiers are coming out of serviced offices and setting up on their own in smaller units giving them more control over their costs.”
Smaller firms also have the advantage of working within shorter lease terms giving them greater flexibility to react to challenging market conditions.
The amount of space let during the first half of the year in the city centre between 1,000-3,000 sq ft rose by 75 per cent while out of town take up of offices under 5,000 sq ft increased by 26 per cent.
The smaller office sector was one of the brighter spots in Colliers’ mid-term report on office take up in the greater Bristol area.
The report shows that strong demand for prime office space in Bristol City Centre at the start of the year faltered in the second quarter, leaving city centre take up on a par with 2010.
Just two transactions over 10,000 sq ft took place in the second quarter against four in the first.
This left second quarter take up at 81,725 sq ft – some 49 per cent lower than the first quarter but up 18 per cent on the same period last year.
The largest city centre transaction in the second quarter was Triodos Bank, which took 27,221 sq ft at Westmark’s West One in Deanery Road. The deal was the only grade A letting in the city centre this quarter, compared to three in the first quarter.
The out-of-town market also struggled, with a pronounced lack of larger transactions. As a result, total take up in the second quarter (city centre and out of town) fell by 31 per cent to just under 160,000 sq ft.
Out-of-town take up totalled 77,883 sq ft in the second quarter, up 8% on the first quarter, but down by 35 per cent on the same period last year. Grade A lettings made up 27,823 sq ft (36%) of the total and included the largest letting of the quarter (Brightside Group taking 18,796 sq ft at Lysander House, Cribbs Causeway), plus three lettings at Brabazon Office Park, Filton.
However, compared to the first half of 2010, out-of-town take up was 40 per cent lower, mainly due to a lack of transactions above 15,000 sq ft.
Mr Preece added that the figures demonstrated continued uncertainty in a challenging market.
“The prime offices sector continues to take two steps forward and one step back,” he said.
Better quality buildings had performed relatively well, as they had in 2010, said Mr Preece. He predicted the marked lack of quality space may force occupiers into some of the large amount of grade B stock currently available.
“It’s clear landlords who are able to refurbish their accommodation are seeing the most movement,” he said.
Grade A quoting rents were static at £27-£28 per sq ft, although most deals were marginally below these levels with significant incentives.
Rents on good grade B space were £18-£20 psf with poorer grade B at around £10 psf. Demand came from most sectors with the financial sector particularly strong.
