Bristol commercial property experts are predicting a stellar year for the city’s office market as occupier demand grows – much of it driven by the Hinkley Point C nuclear power plant.
They point to a strong end to 2016, including the long-expected announcement that HM Revenue and Customs (HMRC) is to base one of its 13 new regional centres in 107,000 sq ft at the yet-to-be-built 3 Glass Wharf scheme at Temple Quay, pictured.
Take-up for the whole of last year is likely to be around 800,000 sq ft - well above the five-year average of 533,000 sq ft – according to forecasts from both GVA and Savills.
Running in parallel with this, the area’s industrial market is also expected to build on a strong 2016. Deals at one scheme alone – the Central Park distribution alongside the M49 at Avonmouth – totalled nearly 2.45m sq ft on 121 acres.
This includes the region’s largest ever distribution warehouse – the 1.2m sq ft building for household goods retailer The Range.
Alex Riddell, associate at commercial property adviser GVA, said despite a relatively turbulent year in the wider economy, Bristol appeared to have weathered the storm of uncertainty relatively well, with continued good levels of occupier demand.
He pointed to consulting engineering group Arup’s requirement for 40,000 sq ft. It is understood to be in advanced talks with Complex Developments Redcliff Wharf. If agreed the deal is likely to set a new headline rent for the city of £30 per sq ft.
The Hinkley C effect has already been felt with French energy giant EDF taking space in Bridgewater House, Finzels Reach, where it employs several hundred people.
“Overall sentiment remains very positive in the city centre with a number of new refurbishments now completed in the form of 1 Brunswick Square, Freshford House, Prince House, Augustine’s Courtyard and 31 Great George Street,” said Alex.
“All of these are looking to capitalise on the historically low levels of grade A and good grade B stock,” he said.
“In addition to these refurbishments, we have seen the first speculative office development for some time with Cubex Land’s development of Aurora at Finzels Reach, which will provide 90,000 sq ft of grade A space, targeted to complete in June 2017.”
His views were echoed by Cushman & Wakefield Bristol office agency partner Andy Heath, who said the city now had a chance to become a major force in the UK regional economy over the next few years.
“With the highest number of people employed in digital tech outside Shoreditch, a vibrant cultural life and voted the best city to live in the UK by The Times, an improving infrastructure with electrification of the train lines and a new rapid transport system across the city due to open in 2017, it is a city at the forefront of occupiers and investors’ minds,” he said.
“This year will also be the year that the construction of the Hinkley Point nuclear power station really gets underway – the largest single construction project in Europe and twice the size of the London Olympics.
“This is not only good for the employer demand of today but provides the flexibility to respond to employer needs in the workplace revolution that is already occurring. Demand though is only one side of the equation and perhaps as importantly we now have the operators, developers and investors that recognise these changing workplace requirements. This combination provides vital flexibility that should underwrite the Bristol story for some time to come.”
Savills’ Bristol office business space team director Christopher Meredith said the city’s market was driven by demand from TMT, professional and energy occupiers taking space in the city.
This influx had resulted in a significant decrease in the supply of city centre grade A stock, with levels currently at 117,116 sq ft (10,880 sq m). In order to cope with the demand landlords, particularly those with TMT tenants, were refurbishing their offices, with the refurbishment/redevelopment pipeline at an estimated 300,000 sq ft (27,871 sq m).
“The Bristol office market has benefited from constant interest from occupiers, however grade A stock is in short supply and the Aurora building is currently the only speculative development in the city,” he said.
“Looking ahead to 2017 we expect to see tenants shift their attention to pre-lets as the grade A market continues to be constrained and demand for space remains strong.”
Savills said as a result of increased demand there had been rental growth in both grade A and B stock in Bristol. Refurbished office space is now reaching rents of £27 per sq ft (£291 per sq m) in grade B stock, just below the headline rent of £28.50 per sq ft (£307 per sq m). It is predicted that in 2017 rents on grade A space will reach and even exceed £30 per sq ft (£323 per sq m).
HMRC will move up to 1,250 civil servants from across HMRC into 3 Glass Wharf between 2019 and 2021, including teams working on tax compliance and debt management.
HMRC chief executive Jon Thompson said: “HMRC has a large and long-established presence in the South West and the new regional centre in Bristol demonstrates our commitment to the region and its economy. It also marks the next step in HMRC’s transformation into a modern, digitally-advanced tax authority and will bring compliance teams together with sophisticated IT and data analytics, to increase our effectiveness in cracking down on tax cheats.
“We are delighted to have agreed terms for the 3 Glass Wharf building and to have made a commitment to our new location in Bristol.”
The eight-floor building is being developed by Salmon Harvester Properties and forward funded by Legal & General. It is understood HMRC will pay a rent of £28 per sq ft – the same as neighbouring occupiers PwC at 2 Glass Wharf.
Mayor of Bristol Marvin Rees called HMRC’s plans great news for Bristol and the Temple Quarter Enterprise Zone, following on the heels of the University of Bristol plans for a £300m campus in the zone.
“A new regional centre for HMRC will bring many more jobs to Bristol and is another sign that the scale of ambition for the city is being recognised as we expect more organisations and businesses to be attracted to the city in the future,” he said.
BNP Paribas Real Estate represented HMRC; Alder King advised Salmon Harvester on the letting and HSM advised on the investment and funding.
