Only one Grade A deal in Bristol city centre20th August 2012

A DTZ report reveals that only one grade A deal was made in Bristol city centre in Q2 2012

Q2 Bristol city centre take-up decreased to 96,200 sq ft following two strong previous quarters. This is below the three year quarterly average of 104,000 sq ft and further behind the five year quarterly average of 118,000 sq ft.

The only grade A city centre letting in Q2 was for 8,000 sq ft to Towry at The Portwall. The deal was driven by a lease event with evidence of the company trading up in the current environment. Grade A take up in the first half of the year has only totalled 16,000 sq ft, which is 30% down on the five year average.

The two largest transactions were both sales, to an owner occupier and a serviced office operator respectively. The majority of remaining transactions were for grade B space in units of around 5,000 sq ft or below.

Another notable transaction was for 8,100 sq ft of high tier grade B space to Ovo Energy at The Core, reaffirming the growing trend of sustainable firms locating in Bristol. The recruitment, professional services and TMT sectors have also been more active than others in recent quarters.

Prime headline rents remained unchanged in Q1 at £27 per sq ft. Incentive packages remain significant for grade A transactions. Incentives on a ten year term with a break in year five are 15-18 months initially with an extra nine months if the break remains unexercised.

Q2 has seen a reasonable number of new requirements for city centre offices. However, the general sentiment in the market is that enquiries are taking longer than usual to translate into deals due to ongoing occupier uncertainty.

Renewed uncertainty about the future of the eurozone, disruptions to the banking sector and a weaker outlook for regional occupier markets has heightened investors’ sensitivity to risk. Funds are now typically seeking annuity-type prime investments with 20 years or more of unexpired income.

Andy Heath, Head of Office agency at DTZ in Bristol said: “Bristol’s Q2 2012 take-up was in line with the three year quarterly average, although this was masked by the fact that 42% of deals were owner occupier transactions. There was again only one grade A transaction in the quarter, but grade A availability remains low at 311,000 sq ft. The highest level of activity remains at the grade B level of the market with a number of larger transactions looking to commit to space in the next quarter.

“We expect there to be improved levels of activity in Q3 2012, since a number of deals are currently under offer. If further requirements finally commit to space, confidence could return to the market.”