Global building consultancy group Arcadis is to relocate its two Bristol offices to the £40m, 2 Glass Wharf flagship office scheme at Temple Quay in the largest city centre office deal of the year.
The move has also prompted the 100,000 sq ft building’s owners Salmon Harvester and NFUM to increase the rent they are seeking on the remaining vacant space to £30 per sq ft – a record for Bristol and a clear indication of the severe lack of grade A space in the city centre. 
Arcadis is taking the entire first floor of 2 Glass Wharf, pictured – nearly 16,800 sq ft – joining accountants PwC, which recently moved into 37,150 sq ft over three floors in the building.
PwC agreed a rent on its space of £28 per sq ft a year ago and with two other city centre deals this year achieving £28 and £28.50 – ADP’s move to 8,350 sq ft at Templeback and Handelsbanken’s relocation to 3,002 sq ft at 66 Queen Square respectively – property agents have been expecting £30 to be chalked up on the decreasing grade A stock.
Salmon Harvester director Rorie Henderson said: “We’re delighted to have secured another strong covenant in the building and to have it over 50% let.
“2 Glass Wharf has previously set new office rental levels for Bristol and we’re confident that we’ll push through the £30 per sq ft level in 2016.”
Alder King partner Simon Price added: “We’re delighted to have helped secure two highly prestigious occupiers for 2 Glass Wharf. This latest significant transaction puts the property in a strong position as we go into 2016. We’re already in discussion with other parties regarding the remaining floors which we hope will come to fruition early next year.”
Arcadis, formed in September when brands such as Hyder Consulting and EC Harris were brought together under one name, is relocating to 2 Glass Wharf from offices in Portwall Place and The Pithay.
Director and head of the Arcadis Bristol operation, Richard Bonner, said: “Following a rigorous selection process, we are very pleased to have agreed terms to take the first floor at 2 Glass Wharf.
“The building provides highly flexible and prominent Grade A space over a single floor and, importantly for us, is located close to Temple Meads station and within the Temple Quay Enterprise Zone.
“This relocation provides us with the opportunity to bring all our Bristol staff into one location and situated over a single floor, following our move to a single, global Arcadis brand earlier this year. In bringing together the heritage EC Harris and Hyder names under one single entity, we now have more than 160 talented people working in Bristol alone, and this new office location allows us to truly realise the benefits that come from greater collaboration.”
But the move has left Bristol property agents more fearful that the lack of premium office space in the city centre could hamper the growth plans of local businesses and potentially deter inward investors. 
GVA regional senior director Jo Davis recently said just 185,000 sq ft of prime office space was immediately available in Bristol city centre – with no speculative developments underway – compared to Manchester, where 1.5m sq ft was under construction.
The situation has been made worse by lower grade space, which would traditionally have been refurbished, being converted to residential use under the Permitted Development Rights. In some cases, such as the 106,000 sq ft Lewin’s Place and the 180,000 sq ft Pithay – the city centre’s largest office block – this has forced occupiers to relocate, so reducing further the amount of vacant space.
Attention is now turning to a number of city centre office schemes which could start next year, bringing hundreds of thousands of sq ft of much-needed space for the top end of the market.
Construction work is scheduled to start early next year on Commercial Estates Group’s 200,000 sq ft, eight-storey Aspire scheme in Victoria Street, pictured above in a CGI image – although completion would not be until 2018.
A number of other schemes mothballed by the recession could start including two on Temple Way – Carlyle Group’s Bank Place on the site of the former Clerical Medical headquarters, which is under offer and has lapsed consent for 300,000 sq ft of office space, and Royal London Asset Management’s Glassfields, which has outline planning pending for up to 393,000 sq ft of offices plus 16,000 of residential and retail.
Salmon Harvester has planning consent for 120,000 sq ft of offices plus three retail units at 3 Glass Wharf.
According to Savills, city centre take up was 397,000 sq ft at the end of the third quarter this year and is expected to total around 550,000 sq ft by the end of the year – just above the five-year city centre average of around 525,000 sq ft.
The firm’s director of business space Christopher Meredith said: “We believe demand next year will come predominantly from the TMT (technology, media and telecommunications) sector as most of the accountants and lawyers in Bristol now have their requirements fulfilled.
“Furthermore, we expect several new requirements to come live in 2016 combined with speculative development starting in earnest as existing Grade A supply continues to be squeezed.”
He also predicted the return of the office refurbishment market.
“There has previously been a focus on the conversion of office space in Bristol to alternative uses including residential and student accommodation,” he said.
“During 2015, however, we have seen the lack of office space available in the city drive the demand for value-add office refurbishment opportunities. We estimate there is circa 350,000 sq ft of vacant possession refurbishment opportunity space either currently on the market, under offer or having recently exchanged.”
According to the latest Office Market Pulse report from national commercial property
consultancy Lambert Smith Hampton (LSH) just 10% of office take-up in the third quarter was grade A, compared with 72% grade B.
This had led to landlords having the advantage in the market, leading them to increase prime rents and reduce incentives, it said.
And while some refurbishments have been carried out that have helped to improve the quality of office stock, the demand for grade A premises would only be met through new builds, according LSH Bristol director of office agency to Peter Musgrove.
“The level of grade A take-up has continued to fall since last quarter and due to a lack of available stock, we do not expect these levels of take-up to increase until further stock is developed,” he said.
“There have been no new developments come to market this year and while there are several development sites available, investors are reluctant to start construction without a pre-let for at least part of the space.
“A healthy level of occupational demand, combined with a shortage of grade A space, has provided a strong platform for rental performance and this has been further aided by the substantial amount of secondary office space that has come out of the supply chain to be converted into private residential or student schemes.”
