Bristol city centre will suffer from an acute shortage of top-end office space over the next 12-18 months due to a lack of major development, according to property agents.
As a result, office rents, which stayed level last year, are expected to rise sharply as occupiers compete for the best space.
Overall take-up of offices in the city centre and out-of-town markets slumped last year despite an increase in activity during the final quarter, official figures from the Bristol Office Agents Society show.
Total take-up for the year was 419,180 sq ft, a third lower than the 2022 figure of 620,000 sq ft – although that was the highest since 2017 and higher than the five and 10-year average., due to pent-up demand caused by inactivity during the pandemic.
The Bristol Office Agents Society, which represents the main commercial agents operating in the city, put a positive spin on last year’s total, saying that a “flurry” of deals had crossed the line in the final quarter to give a better-than-expected figure. Without these, 2023 would have been the worst year on record.
While headline rents in the city centre remained at £42.50 per sq ft last year, some space is now under offer at rents up to £46 per sq ft.
Incentives also remained at a low level, according to property agents, and these trends are expected to continue as tenants seek, and are prepared to pay for, high-quality space. The gap between prime and super prime will grow in 2024.
Bristol Office Agents Society said: “While several developments are on track to complete in 2024, the number of new developments that started on site through 2023 was less than 2022.
“So whilst there is supply for the shorter-term, long-term supply remains tight, especially for super prime accommodation which is going to drive top end rental growth.”
Schemes due to complete this year include CEG’s 200,000 sq ft EQ on Victoria Street, pictured top, which is around 80% pre-let or under offer, Trammell Crow and Tristan Capitals’ 212,000 sq ft Welcome Building (formerly 4 Glass Wharf) at Temple Quarter, which is approximately 25% under offer, and AXA/Bell Hammer’s Assembly Buildings B & C on Temple Way, which have also secured pre-lets.
There are also a number of comprehensive refurbishments expected to complete this year, including Credit Suisse’s 3 Rivergate, Oval’s The Fairfax, M&G’s Temple Circus and CEG’s Crescent Centre.
Among the 34 deals completed in the city centre in the final quarter was Dyson’s long-awaited acquisition of 66,317 sq ft at 1 George’s Square, Finzels Reach, pictured above, which the engineering group will convert into a £100m research and development hub.
The building was previously occupied by law firm Clarke Willmott, which is relocating to Assembly.
Total city centre office take-up in the quarter was 193,183 sq ft, with an average deal size of 5,682 sq ft.
CSquared office agency director Andy Heath said while the overall core stats for 2023 did not make good reading, proper market activity had returned and was expected to continue over the next 12 months.
“The lack of any major development commencements during the past 18 months will create an acute shortage of super prime supply in 12-24 months’ time which will lead to some interesting headline transactions,” he added.
“Some astute occupiers are already aware of this and are out looking in the market far ahead of when you’d expect them to start their occupational strategy for a potential relocation.”
Colliers office agency director James Preece added: “Following a challenging first nine months, it was great to see the Bristol office market bounce back in the final quarter of the year.
“Prime rental levels have been pushed by occupiers willing to pay more for the best-in-class sustainable office space and this trend looks set to continue in 2024.
“There are a number of larger deals under offer and requirements in the market, so we are expecting to see far better conditions than last year.”
