The lack of supply that resulted in a spectacular 14% increase in Bristol office rents in 2017 is set to drive them to an even higher level in 2018.
James Preece, national offices director at Colliers predicts prime rents in the city centre will continue to rise beyond the £32.50 per sq ft recently achieved for One Cathedral Square.
“During 2017 headline Bristol office rents rose by 14% from £28.50 per sq ft to £32.50 per sq ft, and with supply now at an historically low level it seems inevitable the upward trajectory will continue and even higher figures will be achieved in 2018,” he said.
“This is particularly the case for Grade A rents, which have been driven upwards by lack of speculative development. I would not be surprised to see top rents in the city centre head closer to £34 or even £35 per sq ft as more deals are done at Aurora, the 95,000 sq ft scheme at Finzels Reach which is the only speculative office development in Bristol.
“Pre-lettings at Aurora are being agreed at such a pace that although it will bring more supply to the market when it completes in mid-2018, it will do little to address the problem of lack of space in Bristol.”
Mr Preece added that lack of new build office stock in Bristol is fuelling demand for refurbished options, resulting in some high returns which have again been driven by lack of stock.
“It will not be unrealistic to anticipate rents of £28.50 per sq ft being achieved for Grade B city centre space in 2018 – reaching the figure that Grade A space was achieving in Bristol at the start of 2017,” he said.
“Tower Wharf is a very good example of the demand for quality refurbished space, with two floors at close to 20,000 sq ft under offer at the moment.”
Mr Preece added that 2018 was likely to be another strong year for office investment in Bristol, with the attraction of the city to investors underlined by the recent £33.5 million sale of One Cathedral Square, in which Colliers International represented the vendor.
“Confidence in Bristol will undoubtedly have been boosted by the fact that both city and out-of-town witnessed take-up levels well-above the five year average in 2017.
“The year also saw the most dramatic increase in city centre rents since 2014-16, when Grade B office space went up by circa 30% as a result of Permitted Development Rights removing a substantial proportion of secondary office stock from the city centre market.”