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Demand for office space in South West at its highest since 200013th April 2014

Over 4 million sq ft of office space is likely to be converted into residential housingDespite getting off to a slow start this year, the office market in the South West as well as across the rest of the UK could well achieve take-up of 30 million sq ft in 2014, even though Q1 figures fell to 4.5m sq ft (a 19 per cent reduction over last year) according to national commercial property consultancy Lambert Smith Hampton's (LSH) latest Office Market Review.

The report revealed that an increase in take-up in 2013 of 33 per cent to 25.6 m sq ft (the highest level since 2007) was driven by expanding businesses looking for extra space, as well as occupiers who had reached the end of their leases in buildings, which were no longer suitable as offices.

The temporary relaxation of planning rules in May 2013, which made it easier to apply for a building's change in use, has resulted in a large amount of obsolete office space throughout the UK, including Bristol, being taken out of the market and converted into residential accommodation.

According to Peter Musgrove, director of office agency at LSH in Bristol and the South West, at least 315,000 sq ft of office space in Bristol was converted to residential use in 2013, with more even more conversions in 2014.

“With the amount of space being taken off the market in the city centre and the increase in demand due to a lease events bubble towards the end of 2015, we should start to see a shortage of all stock and a small increase in rents,” said Peter.

“Limited alternative uses for older out-of-town business park stock means we still see an over supply in this sector. However, if there continues to be a lack of development out of town, this space could come back into use or become economically viable for a developer to refurbish/redevelop.”

The number of notifications for office-to-residential conversion increased b 500 per cent across the whole of the UK in the first six months following the introduction of permitted development. Outside London, over 4m sq ft of office space has been earmarked for new homes, which could create up to 6,000 new homes.

 “The office market has been a major beneficiary of the economic recovery and improving business confidence. We expect that demand will reach its highest level for more than a decade this year as the corporate and professional sectors continue to hire new staff and invest for growth.

“With thousands of new homes being created as a result of the streamlined conversion process, extending the deadline beyond 2016 would seem like a sensible way of tackling the UK’s chronic housing shortage. This acceleration of the conversion process together with strong occupier demand will push up rents in many locations and drive speculative development.”

Written by Richenda Oldham

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