A Bristol-based development expert says the end is in sight for the conversion of office buildings into residential that has transformed the city centre.
Chris Dawson, director of the Development Consulting and Agency team at the Bristol office of Colliers International, has been involved in office-to-residential sales in recent years, including Kenham House and Wilder House in Stokes Croft which attracted considerable attention from developers.
However, he believes this type of conversion will become less common in the future - both as the supply of suitable stock diminishes, and as a result of rising secondary office values in Bristol city centre. He predicts that in future there will be greater emphasis on new and mixed-use development.
Mr Dawson said: “Only two years ago good Grade B office rents were typically £18.50 per sq ft. Now there are some that have achieved £27. Over the same period best ‘Grade A’ offices rents remained at just below £30 per sq ft.
“It is therefore more likely that appropriately located secondary office buildings will be retained in office use than a couple of years ago, and that these will be increasingly geared towards the Technology Media and Telecoms (TMT) sector which is growing strongly in the city with around 25% of the Bristol City Centre take up going to this sector. In turn, this will restrict the supply of buildings with potential for residential conversion.”
Mr Dawson added that a factor in rising office values had been the conversion of commercial building for residential use, resulting in lowering of the overall supply level.
“Opportunities for Permitted Development conversions from offices to residential, where planning permission is not needed or is simpler to achieve, have become much more limited in Bristol, yet the demand for city living flats units continues unabated,” he said.
Mr Dawson added that the question now was whether demand for offices in Bristol city centre would result in some of longstanding undeveloped office sites coming forward for new build residential development.
“Although the Gross Development Values generated by well-let new offices at circa £600 per sq ft exceed the general tone of residential sales values many of the undeveloped office sites in the City are chasing what may prove to be illusive office pre-lets.
“At the same time residential values continue to grow with competing potential, on some sites, for further student and/or build to rent schemes. On some sites we would expect this to lead to greater mixed use development as owners and funders hedge their development bets.”