Demand for office space in the centre of Bristol is holding up well although the out-of-town market continues to be patchy, according to Bristol office agents Jones Lang LaSalle (formerly King Sturge).
Their figures for the first half of the year show that take-up in the city centre totalled approximately 245,000 sq ft – slightly up on the total of 243,000 sq ft recorded in the first six months of 2010.
However, 148,000 sq ft of space was taken out of town, down more than 100,000 sq ft on last year’s first half figure of 249,000 sq ft and just short of the 10-year average of 320,000 sq ft per annum.
Nor is the city centre market robust enough for developers to feel confident enough to begin any speculative projects, says Ian Wills, director in the office agency team at Jones Lang LaSalle. But he is expecting further improvement in the second half of the year.
He said: "We have seen a handful of good Grade A enquiries such as Triodos Ethical Bank taking 27,000 sq ft at WestOne, Deanery Road, and Marsh /Mercer taking 18,000 sq ft at The Paragon on Victoria Street, and also some pre-let activity in H1 with law firm CMS Cameron McKenna taking 26,300 sq ft at College Square, Harbourside.
“There is only 255,000 sq ft of standing Grade A stock currently available, taking out that under offer, and a further 136,000 sq ft under construction at Finzels Reach and Harbourside. Based on average annual take-up this will have diminished in the next two-three years – a figure ahead of most of the other major regional cities. This may further drive the pre-let market.
“Nonetheless there are no signs that any speculative development may be about to begin again with developers still uncertain about the economic climate and problems with availability of debt funding. However we may see this resume in early 2012 as stock further reduces and confidence continues to grow.
“In the meantime this could also allow for an opportunity in the Grade B market which has been experiencing an oversupply but where some excellent tenant value deals are available.”
There had been two major out of town deals in the first half of this year, said Mr Wills – 13,500 sq ft was taken by L3 Communications at 920 Aztec West, and a further 18,500 sq ft went to the Brightside Group at Lysander House.
But the out of town market continues to suffer from falling demand among traditionally important sectors such as defence, services and technology and this has led to second-hand tenant space flooding the market .
“The good news is that in the office market overall, we are seeing more enquiries driven out of mergers and acquisitions as the general business market becomes increasingly competitive, and a higher proportion of tenants are now actually moving," said Mr Wills.
“There is an improved level of confidence around compared to 2009 and 2010, and we do expect Q3 and Q4 to show further improvement.”
