Office investment into Bristol reached £112 million during the first half of the year, compared to £87.9 million in the same period last year.
This equated to a total of nine transactions which highlights how market conditions generally remain challenging, with a relative lack of new opportunities being brought forward. Unsurprisingly there has been some cautiousness from investors over the last 18 months, particularly towards offices as it remains to be seen how businesses will develop their occupational strategies in the medium-long term.
The largest deal of the year so far was Aberdeen Standard’s acquisition of Temple Quay House where they were advised by Colliers in purchasing the asset off-market from Alpha Real Estate for £75 million.
There is no doubt that for many employers, flexible and hybrid working will become much more apparent across industries and this will consequently shape how offices are used going forwards. We expect there to be a shift away from open plan offices, to more hot desking and collaborative workspaces, with a particular focus on amenities and wellbeing for employees. That said, there remains a good level of demand for prime, well-let office investments and we expect there to be an uptick in the number of transactions in the latter part of this year.
Demand for good stock
Moving onto industrial, throughout the pandemic the sector has witnessed a huge growth in demand both occupationally and from investors too. The surge in tenant demand has been led by e-commerce and grocery companies. Investment volumes have exceeded that of previous years with circa. £608 million transacted in the region during 2020 and £354.53 million in H1 2021. The region is well poised to exceed 2020 investment volumes, which were exceptionally high in comparison to previous years.
Similarly to offices, with demand for good stock being so strong, many of the industrial opportunities which have transacted have done so off-market. Those that have been brought to the market have seen competitive rounds of bidding. The largest transaction in the first half of the year was the sale of Accolade Wines in Avonmouth which was sold off-market for £90 million. The sale price of the 870,000 sq ft unit equates to a net initial yield of 5.10%. In terms of multi-let estates there has been a limited number of transactions so far this year, the most significant was Orchard Street Investment Management’s sale of Rockingham Gate in Avonmouth which is a fully let four-unit estate. This opportunity was marketed and went to best bids, eventually being bought by Mayfair Capital for £15.9 million which was a net initial yield of 4.12%.
Looking ahead, we expect well let, secure long income assets to remain at the forefront of investor requirements. We also anticipate there will be a boost in investment volumes in the second half of the year driven by the increase in the number of opportunities that have been brought to the market over the last six weeks.
This article was originally published in Colliers' Bristol Spotlight publication in September 2021.
About the author
Richard Coombs is a director within the National Capital Markets team who specialises in the South West of England market. He has advised the likes of Aviva Investors, Patrizia and Aberdeen Standard Investments.
To contact Richard, email Richard.Coombs@colliers.com