Downturn hits demand for office space in Bristol city centre

November 11, 2011

Demand for office space in Bristol city centre was slightly down in the third quarter and also below the same period last year, according to property specialists Knight Frank.

Third-quarter take-up fell from 81,000 sq ft to 70,000 sq ft, with a total of 311,000 sq ft office space taken during the first nine months of the year compared with 356,000 sq ft for the same period in 2010.

Knight Frank's Bristol office head Tony Nicholas said: “Full year take-up is unlikely to reach the 459,000 sq ft in 2010, which itself was a below average year.

“Also there has been a marked decline in the volume of active searches – down from 364,000 sq ft in quarter two to 318,000 sq ft in the last quarter.

“Like other major cities, the recent UK economic slowdown is evident in the Bristol office market.”

Headline rents remained steady at £26 per sq ft with net effective rents unchanged at £19.50. However deals in the pipeline point to an increase in headline rents to £27.50 per sq ft in the fourth quarter.

“Market churn is progressively shifting the balance of supply towards lesser quality space,” added Mr Nicholas.

“Grade A supply fell to 274,000 sq ft in quarter three, down 18% from a year ago.”

On the investment front, third quarter investment turnover was £497m outside London and the South East, an improvement on the previous quarter but nevertheless 38% below the 10-year quarterly average.

Knight Frank's Bristol investment partner Steve Oades added: “In addition to the restrictions on debt availability, a major barrier to activity remains a lack of suitable prime, long-income assets.

“There are a number of UK institutions actively seeking opportunities in the regional markets in search of higher yields outside Central London.

“Prime yields in Bristol have eased to 6.25%, although with fewer deals around this is based largely on sentiment.”

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