The South West’s office market has staged a strong recovery from the shock of the pandemic, according to research from Alder King, with over 1.7 million sq ft of office space transacted across the region last year.
Alder King states that 2021 office take-up was back to its 2019 pre-pandemic level and tracking just above the five year average.
The star performer was the Bristol city centre market where Q4 office take-up last year reached 250,000 sq ft, its second highest single quarter level since 2016, beaten only by Q4 2019. Gloucester, Exeter, Bath, Bridgwater, Plymouth, Taunton and Truro also recorded increased take-up, with a number of these locations setting new headline rents.
“The recovery reflects the growing acknowledgement of the benefits of office working, from social interaction and collaboration, community and training,” says Simon Price, Alder King’s head of agency.
“Many firms have adopted at least a short-term move to hybrid working over the last two years but are expecting more staff to return to the office at least part-time this year as restrictions are lifted. They are also reducing the size of their accommodation but trading up in quality.”
“By far the most noticeable trend in the office market is the increased focus by developers, investors and occupiers on employee wellbeing and building sustainability, brought about in part by the pandemic but also last year’s COP26.”
Meanwhile the region’s industrial/logistics sector continues to experience insatiable demand for quality space, with rents and capital values hitting new highs.
Over 5.5 million sq ft of space was transacted across the region last year, driven by ongoing changes in consumer spending patterns and demand from logistics providers. This would have been higher if not for a significant shortage of good quality available space.
Developers are responding to demand, bringing forward new schemes in key locations but these are often pre-let or under offer either before or during construction to the more forward-looking occupiers.
“The competitive nature of the market is putting landlords very much in the driving seat when it comes to setting rents and lease terms,” said Andrew Ridler, head of industrial/logistics at Alder King.
“Firms seeking good quality space must be much more proactive and plan ahead to secure what they need. And those with large requirements of over 100,000 sq ft are likely to have to look at design and build options due to limited stock.”
In the investment market, transaction volumes were up in the majority of key locations in 2021 totalling £1,016 million. As the influence of Covid reduces, Alder King expects returns to stabilise in 2022 and investors’ requirements to evolve toward a more sector-agnostic approach where the quality of individual assets and their locations become more important.