Bristol is set to be the first of the UK’s top nine cities to see commercial property demand outstrip supply, according to new research by commercial property and management company GVA.The writing has been on the wall for some time now, but this dramatic turnaround could result in commercial property owners, developers and occupiers having to change their thinking.
Due to its position as the largest population centre in the region, and its wealth historically being due to its port and commodities trading,Bristol has a vibrant centre with a diverse range of commercial property on offer. Bristol has flourished thanks to the aerospace, defence, media and IT sectors that now dominate its economy, so demand for commercial property has never been higher.
Looking at take-up across the UK’s top nine cities outside of London– Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester and Newcastle – GVA found that commercial property take-up was considerably higher, in fact 9% up on the three-year quarterly average. Additionally a lack of new commercial property development means the supply of top quality Grade A office space is declining even further. GVA expects that Manchester, Edinburgh and Glasgow will follow Bristol’s lead with increasing commercial property demand in future years.
Companies such as HDG Mansur, the real estate property and management company, will find good cheer in the news, particularly given their recent completion of 110,000 sq ft of speculative commercial property space in Bristol. The same goes for Edinburgh City Council, which is currently in the process of building 180,000 sq ft of speculative commercial property space as part of the Edinburgh International Conference Centre, due for completion in 2012.
Despite the positives, the longer-term prospects for the market continue to give concern to those in the commercial property and serviced offices sector. Demand in the longer term remains pretty thin on the ground despite big deals, like the 215,000 sq ft letting to Admiral in Cardiff, boosting the figures.
The amount of commercial property space under construction in UK business parks is at its lowest in the survey’s sixteen-year history, with only 694,000 sq ft of commercial property space on site at year end, a 44.9% decline on last year’s result and 76.7% below the current five-year survey average. The majority of new commercial property development is now dependent on pre-letting due to the skittish attitude of many in the sector.
A total of 16.2m sq ft of commercial property floor space is immediately available for occupation by mid-2011, a slight reduction on the figure for December 2010. Availability in the North West, South East and East regions is falling, while the Midlands, Scotland and the North East are seeing record highs.
The report expects the recovery of the commercial property occupier market to gradually improve but, given the importance of public sector demand in Bristol and the rest of the country, which accounts for around 20% of commercial property floor space, the impact of spending cuts could be significant.
Even though Grade A commercial property stock is diminishing, rents have continued to stagnate with a fractional 0.1% year-on-year increase in the headline figures. All the indicators point to a stabilisation in rents come next year, with an expected growth of 2.5% the year after.
Bristol is top of the polls this year, but the market is very fickle and it’s anyone’s guess as to who could be the leader of the commercial property pack next time.