South West | Reignited and Growing

Tim Davies Colliers UK

The recession was so deep and lasted for so long there were concerns that the market would never recover. At some point in early 2014 a switch was flicked and the market in the South West was reignited. Wales is lagging slightly behind but there are pockets of activity which suggest that activity levels are on the increase here too.

The dynamics in each property sector are all slightly different, but the sentiments are broadly similar with positive vibes and optimism across all. True, some sectors are stronger than others, and some locations are performing better, but the fact remains that the economy is looking healthy and this is translating into growth.

Office space take-up hits 1m sq ft

The office market has continued to gather pace in 2014. The out-of-town market has seen a number of deals in excess of 20,000 sq ft, whilst the city centre saw a surge in the number of transactions completing. A combination of both in and out-of-town markets has seen the full year total take-up over the last three years surpassed by the third quarter of 2014.

The leading deal this year saw KPMG sign up for circa 52,000 sq ft at Skanska’s 66 Queen Square. Also, six deals over 25,000 sq ft took place in the City Centre in the final quarter of 2014, assisting in total take up reaching circa 1.27m sq ft and prime rents increasing to £28 psf.

Like Bristol, Cardiff has also suffered from a low level of Grade A offices which has resulted in two speculative schemes that will deliver over 200,000 sq ft.

Retail a mixed bag

This is arguably the sector where the recovery was least noticeable. Some towns and cities such as Truro, Salisbury and Cheltenham have shown rental growth while others such as Gloucester, Swansea and Newport are showing rental decline. We have acquired new units for returning clients Boux Avenue in Drake Circus, Plymouth, and are close to agreeing terms for Simply Be in major towns across the region. Major redevelopments in Winchester, Dorset and Newport also reflect the general confidence in the market. The out-of-town market is equally patchy but Colliers has completed one of the few new schemes in Clevedon with Aldi and Pets at Home reflecting the strength and confidence of both businesses.

Industrial reaching tipping point

The demand levels have been impressive and with supply rapidly reducing, the market is fast approaching tipping point. Accessibility for all forms of transport remains the key to the South West’s success. Motorway connectivity is undoubtedly the key location criteria for occupiers.

As you would expect with availability being squeezed it is inevitable that both rental and capital values will increase. This is born out by the recent letting to PRISM which took 15,000 sq ft at Standard Life’s flagship scheme Emerald Park Bristol at £7.75 psf, which is back to pre-recession levels. A subsequent letting has exceeded this figure so the portents are certainly looking very positive for rental growth and will undoubtedly encourage development.

Hotels in high season

The South West hotels team has been one of the busiest transactional departments in 2014. Strong interest in this sector from buyers, investors and banks is driving the market and we are active across all price ranges. It’s been exciting to be involved in the development of a new 200 bed hotel at Bristol Airport, the sale of the 60 bed Best Western Banbury House Hotel in Banbury and the sale of the prestigious Victoria Square Hotel in upmarket Clifton, Bristol.

National and international investors looking to the South West

In 2014, UK Investment transaction volumes reached £56bn, 8.0% above the equivalent period in 2013, although the investor mix and geography has changed significantly. UK institutional investment increased from 26% to 29% of the total, while overseas investors fell from 46% to 43%. Accordingly, Greater London’s investment share has fallen from 54% of the total last year to 41% this year. Interest in regional assets continues to increase substantially as keen competition and a perception of full pricing in London has caused overseas investors to begin looking outside of the capital at riskier high yielding stock.

Total investment in Bristol year end 2014 (£565m) surpassed the full year total for 2013 (£301m). Bristol represents 1% of all UK deals by value, up from about 0.6% last year and 0.6% in 2012. This improvement in values for Bristol is mirrored in the South West which is increasing from circa 2.5% in 2013 to around 2.9% in 2014. Values are likely to recover faster in the major regional centres such as Bristol ahead of the wider area as a whole. Investment volumes in Wales increased from £380m in 2013 to £642m during 2014.

Sustainability is on the agenda

Bristol, and by association, the South West will be in the spotlight next year as it has been named the “European Green Capital 2015” by the European Commission. Bristol already has strong environmental credentials. The city is committed to creating an energy efficient and healthy living environment. It is second, only behind London, in the number of cyclists commuting. George Ferguson, the City Mayor, is determined to increase the number of cycle lanes in the city centre to further encourage this mode of transport.

Colliers has recognised the importance of the Green Capital initiative and has a specialist sustainability team in Bristol dedicated to advising our clients on new environmental law and policies which have been driven by central government.

Looking beyond

Crystal ball gazing is never easy but throughout the region there is an underlying feeling of well-being. The commercial property market is picking up on this, and we are excited by the
further growth across all sectors and new development throughout the region in 2015 and beyond.


Tim Davies

Head of South West & Wales
Direct: +44 117 917 2048
Mobile: +44 7714 707 676

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