The powerful recovery in Bristol’s commercial property market has made it one of the UK’s office hotspots – with two of the country’s three largest deals taking place in the city.
Research from property consultancy Knight Frank shows that during the second quarter of this year the sale of landmark schemes at Templeback and 66 Queen Square gave Bristol top ranking in the league table of office deals by value. 
During the same period the sale of the flagship Spectrum office scheme at the foot of the M32 was among the top 10 deals in the UK.
Experts said the appearance of three Bristol deals in the national table pointed to a much-welcomed bounce back in confidence in the city – but also highlighted the severe lack of Grade A office space.
Templeback, pictured above, the 123,000 sq ft building occupied by global management, engineering and development consultancy Mott MacDonald, Bristol financial technology firm Momentum Financial, property agents Colliers CRE and NFU Mutual, was sold off market to Orchard Street Investment Management in June for £58.5m – the UK’s largest office deal in the quarter.
Aviva Investors’ acquisition of the 61,500 sq ft showpiece 66 Queen Square scheme, pictured below, for £32.7m from Swedish 
construction group Skanska was third largest. KPMG is to relocate its regional headquarters to the building.
Meanwhile, Maddox Property Partners’ acquisition of Spectrum in June from West Register for £14.1m was also in the top 10 deals during the April to June period.
Steve Oades, head of Knight Frank’s capital markets team in Bristol, pictured below, which acquired 66 Queen Square on behalf of Aviva, said: “Prime multi-let assets are in high demand from both UK and overseas investors, particularly those buildings located in major regional cities where Grade A supply is tight, there are good transport links and there is little anticipated landlord capital expenditure in the short to medium-term.
“The lack of buying opportunities combined with the weight of money looking to invest in the regions has resulted in yield compression for ‘best-in-class’ assets across the UK.” 
In the office leasing sector, following on from the exceptional take up of 2014, the Bristol office market continued its recovery, with demand levels at a healthy level.
Take-up in the second quarter of nearly 160,000 sq ft was above the 10-year quarterly average and – with the exception of 2014 – the highest on record since the first quarter of 2010. The total amount of office space taken during the first six months of the year was 266,003 sq ft, some 10% down on the same period last year, largely due to uncertainty in the markets prior to the general election.
Take-up of Grade A space accounted for 18% of the total in the first half of 2015.
Knight Frank’s Bristol offices agency team partner Martin Booth added: “The current healthy level of enquiries indicates that take up in the first half will be replicated in the second half of the year.
“This ongoing squeeze on availability means that several city centre land owners are currently working up or have submitted planning applications for a range of new build schemes with probable speculative starts in early 2016.
“However, it is the shortage of immediately deliverable sites that means there remains a focus on refurbishment schemes – deliverable within much shorter timescales. AEW at Freshford House, Standard Life at Narrow Quay House and Loxton Developments at 90 Victoria Street are likely to reap the rewards as the supply of new and high-quality space diminishes.”
He added: “At the end of June this year, total availability stood at 1.05m sq ft. The availability of accommodation is being eroded across all qualities of space. This trend will continue through 2015 and 2016. There are no on-going new developments and there is continued removal of office space for alternative uses, predominantly residential and student accommodation.”
Looking ahead, he expected to see rental growth later in the year with prime headline rents moving up from £28.50 per sq ft to £29.50 per sq ft by the end of 2015, driven by supply shortages.
