Bristol bucked the national trend in office take-up during the first quarter of this year with an impressive performance, according to property consultants Knight Frank.
Take-up for the UK’s 11 key regional cities outside the South East was down 14% on the 2010 quarterly average while in Bristol it rose 39%. Two other cities recorded positive figures with Sheffield up 6% and Scotland’s oil industry capital Aberdeen rising a massive 229%.
Bristol’s impressive performance – at 159,000 sq ft – was 48 per cent up on the preceding quarter.
“This is a very encouraging start to 2011 with quarterly take up at its highest level for 12 months,” said Tony Nicholas, head of Knight Frank’s Bristol office.
Overall supply of office space in the city decreased by less than one per cent but there was a more marked lack of Grade A accommodation, a trend echoed across the country with availability falling steadily against a background of limited development.
The spectre of public spending cuts looms large which is creating an element of uncertainty in regional markets but, say Knight Frank, this is counter-balanced by a significant lack of new development over the last two years – in part due to the shortage of development finance.
Despite healthy take-up, Bristol’s prime office headline rent softened to £26 per sq ft in Q1 as landlords focused on reducing voids. Net effective rents, however, remained steady at around £20 per sq ft. Tony Nicholas said: “We believe rents will stabilise at current levels in 2011.
Investment activity also got off to a slow start with first quarter investment turnover for offices outside London and the South East standing at around £450m, closely in line with the final three months of 2010 but significantly lower than a year ago.
Investment activity in the regions should nonetheless pick up as 2011 progresses, say Knight Frank in their latest Regional Market Office Presentation.
In summary, they expect pricing to hold throughout 2011 while such opportunities remain in short supply. In contrast, the supply of secondary is now increasing as banks become more willing to offload property from their balance sheets. Consequently, secondary yields are expected to soften as more opportunities become available.
David Porter, Knight Frank head of office agency in the regions, said: “The regional markets are generally characterised by cautious occupier demand, stable rents, very limited development and the declining availability of prime space.
“With limited new development expected to commence in the short term, it is likely that acute shortages of grade A space will emerge in late 2011/early 2012, leading to upward pressure on rents. This also means that occupiers are more likely to be willing to consider good quality, second hand refurbished space – which in turn will present more opportunities for developers and investors”
