Despite a colourful year of political and economic activity, the South West commercial property market proved extremely resilient in 2016, says Alder King in its latest Market Monitor report, with industrial occupier demand delivering the sector’s best performance for 12 years.
Industrial take-up in the region’s key centres soared from 5.8 million sq ft to 8.4 million sq ft, 44% higher than last year’s total and 89% up on the five year average. As a result, supply fell to 3.6 million sq ft, its lowest level for over 12 years. There were limited rental increases in 2016 but the imbalance between supply and demand will drive demand and increased rental and capital values in 2017.
Total take-up in the region’s primary office markets increased marginally to 1.92 million sq ft but was constrained by the shortage of quality supply. This was particularly evident in Swindon. Bristol, Bridgwater, Exeter and Gloucester all saw increases in take-up, with Bristol recording 1.03 million sq ft of take-up, its second best level since 2007 and boosted by several large city centre deals. Bath set a new regional headline rent of £31 per sq ft for the top floor of the recently remodelled 20 Manvers Street. Exeter achieved a new office rental high of £18.50 per sq ft for the letting of Emperor House at Exeter Business Park.
Despite the market dynamics, developers remain cautious about speculative development and office and industrial stock will continue to reduce. This will impact on the region’s competitiveness in the next two to three years unless more development is brought forward quickly, says Simon Price, head of agency at Alder King.
“Central government is seeking to stimulate activity through infrastructure projects and public sector relocations. Bristol has already benefited, securing a 107,000 sq ft pre-let at 3 Glass Wharf to HM Revenue & Customs and, with confirmation finally secured for the Hinkley project in late 2016, we expect momentum will build in 2017, driving occupier demand, particularly in the local industrial market.”
He added: “While the market should be braced for further uncertainty as the UK negotiates the many changes, there is much to be optimistic about the year ahead. There is underlying investor confidence in the economy and property market. And the UK’s reputation as a safe haven and attractive exchange rates will continue to fuel global and domestic demand for limited opportunities.”
Market Monitor provides a summary of the commercial property market in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton and Truro. It also covers Cardiff and the South Wales Region and include residential development land market and strategic planning reviews.