Bristol’s commercial property market is making a strong recovery with a sharp increase in demand in the first six months of this year and signs of further improvements for the second half, a series of upbeat reports out this week show.
CBRE Bristol’s latest quarterly report shows demand was much higher than in previous years and the amount of property let was also significantly up on 2013. 
Meanwhile, rival Alder King’s mid-year Market Monitor Update shows office take-up in Bristol in the first half of the year rose 22% from 422,000 sq ft to 515,000 sq ft.
It says with approximately half a million sq ft of identifiable demand in the city centre and out-of-town markets, the 735,000 sq ft total achieved in 2013 looks set to be exceeded by some margin. The highest city centre office rent has stood at £27.50 for four years but the prospects of an increase in the second half of the year look increasingly strong.
Colliers International’s Bristol office, which also produced a half-yearly report this week, is also predicting the first rent rises in the city for several years.
CBRE Bristol head of agency and development Philip Morton, pictured right, said: “There are really encouraging signs in the marketplace and it appears Bristol is starting to emerge from the downturn with a lot of positive sentiment. Several large deals are on the verge of going through, which will only add to the momentum. We have not seen such high levels of interest for several years and all the signs are very positive.” 
However, the downside of the increased demand was a fall in the amount of office space to rent, he said. The situation had been made worse by changes in legislation which allowed developers and investors to convert office space into residential accommodation.
In Bristol this has meant a million sq ft of office space being taken out of the market. As a result there is now 1.5m sq ft of available office space in the city – a fall of 11% over the past six months.
New developments about to come onto the market include 2 Glass Wharf at Temple Quay and the refurbishment of 66 Queen Square. Combined, they will add 159,000 sq ft of available Grade A office space.
“Developers are continuing to look for value for money, which means there has been limited demand for Grade A office space,” said Mr Morton. “As a result of the low demand, prime rents have remained static at £27.50 per sq ft. Meanwhile, rents in the second-hand market have improved markedly, going up by as much as 10% in some parts in Bristol.”
The Alder King report shows the supply of industrial buildings in Bristol now stands at just 800,000 sq ft – its lowest level for more than 10 years. Speculative development is now underway to help address the lack of supply.
Simon Price, head of agency at Alder King, pictured below left, said: “The office and industrial markets are gathering pace in all key centres of the South West, particularly Bristol.
“Demand is now approaching pre-recession levels. Supply is constrained in many centres but speculative office and industrial development is now underway. The outlook for the second half of 2014 looks very exciting.” 
Colliers offices specialist James Preece, pictured below right, said the increase in demand towards the end of last year had now translated into completed transactions.
He added: “Despite the largest city centre transaction so far this year being only 16,500 sq ft, there has been a huge level of activity and far more transactions completed compared with the same period last year. This is the highest level of take-up for this period since 2008.
“Activity is concentrated in the sub 10,000 sq ft bracket and deals are generally focused on secondary stock. Although we are seeing demand from a diverse range of sectors, there has been a further increase in requirements from the TMT sector.” 
While the out-of-town take-up at 110,000 sq ft was up by a marginal 3% on the first quarter, against the same period last year the increase was 137%.
Mr Preece said the trend to convert outdated office blocks for residential use was creating demand from firms which had moved out of these buildings.
“There are still a number of businesses which have already left or are about to leave these buildings and are on the lookout for new accommodation,” he said.
“The lack of Grade A office supply in the city centre has shifted the emphasis on to the secondhand and refurbished sectors. As a result, rents at this level are starting to edge up for the first time in six years.”
