Space shrinks

Bristol’s industrial and distribution market performed strongly in 2010 with 193 transactions totalling 213,670 sq.metres, the highest total since a peak in 2007. The driving forces were improved manufacturing and distribution space for retailers.

Chris Miles of King Sturge, Chairman of the Western branch of the Industrial Agents’ Society, said: “The industrial and distribution market in Bristol remains relatively buoyant. It is very encouraging to note that the UK manufacturing sector finished strongly and indeed the last quarter of 2010 saw it record its best trading conditions for 16 years.” DTZ’s Simon Lloyd said: “The South West continues to have the lowest availability of stock in the UK with a limited amount available to occupiers.

The market was, however, buoyed by a number of larger transactions in retailers Morrisons and the Co-op but these were land acquisitions.” Avonmouth is the key location for distribution which is why the Co-op wanted a distribution facility here. This is now being funded by AXA Real Estate Investment Managers. The 40,412 sq.metres scheme is being developed by Stoford and Gallan Group. Stoford’s Dan Gallagher said: “In the current economic climate, forward funding is one of only a few forms of development capital available and we are pleased to work with AXA and continue our long term relationship with the Co-op Group.”

Big sheds dominate

Major distribution facilities are at the heart of a vibrant industrial sector which has emerged strongly from the recession. That is because geographical necessity plays a significant role. That applies to Swindon where the Japanese car firm Honda performs so well and could play a bigger role in the immediate aftermath of the earthquake in the home country.

Its key location brought DIY firm B&Q into a massive 74,007 sq.metres (796,649 sq.ft.) shed on Gazeley’s G Park, South Marston, which was completed two months early. That is a change from the phased occupation that was originally planned. The site has the capacity for two more large sheds, although smaller than B&Q’s, at 40,876 sq.metres (440,000 sq.ft.) and a quarter of that size.

Gazeley’s Charles Blake commented: “Deliverability is the key. The buildings have planning permission and the roads are going in because of B&Q.” In this case the DIY firm bought the freehold. Another substantial development is by UBS Triton Property Fund which has demolished the former Woolworth shed and, working with Graftongate, is seeking planning permission for a 41,805 sq.metres (450,000 sq.ft.) facility although it might opt for a solar photovoltaic park. Also at South Marston, RO Developments (ROD) has sold a 384 sq.metres (4,136 sq.ft.) unit at South Gate for £340,000. Richard Bourne of ROD said: “RO24 Swindon continues to prove popular with local businesses and private investors. We only have 5 units remaining and we expect these to go soon.”

Meanwhile, there has been an improvement in the office market in Swindon, said Kenington’s Jeremy Sutton, with an increase in enquiries in the first quarter and more buildings going under offer. “There are opportunities in lease renewals and companies are now looking to move to better space. This is mainly smaller occupiers although there are some more substantial enquiries in the market.” He expects the totally rebuilt Station Square office property, which at 4,645 sq.metres(50,000 sq.ft.) is one of the largest in town, to do well.

Creating jobs

While sentiment in manufacturing is stronger than for over a decade, there is some hesitation among economists about its effect on employment. In the case of Bristol, Oxford Economics expects employment to be negative for 2010 and 2011, mainly because of the loss of public sector jobs.

The argument is that the service sector is not picking up fast enough to help with employing people who have been made redundant by the government. Oxford Economics looks for a solution in expanded consumer spending and investment.

This might be too gloomy a picture for a region like the South West where a combination of high technology companies, top educational establishments and good environment bring their own impact on the economy.

Law firm pre lets

The demand for space from law firms is confirmed by Cameron McKenna taking 2,449 sq.metres (26,328 sq.ft.) in Crest Nicholson’s 2 College Square, Harbourside.

That is the largest pre let in three years and confirms the top headline rent at £296 a sq.metre (£27.50 a sq.ft.).

Crest Nicholson’s Ian White made the point that the rent free period was in line with other recent schemes but (more importantly) Bristol is not over supplied. Construction on the new office, which allows the law firm to move from a smaller property, is due for completion by the end of the year. The developer now has only 6,503 sq.metres (70,000 sq.ft.) of offices to complete on the site.

Brunel would like it

The first stage of the regeneration of the historic area around Temple Meads station has been completed by TCN with Bristol & Exeter House (B&E House).

Originally the headquarters of the Bristol and Exeter Rail Company, the Jacobean style property has become a boutique office aimed at catering for a mix of start ups, young and entrepreneurial companies that require a high level of service. Although small at 1,394 sq.metres (15,000 sq.ft.), its attraction is shown by the early leasing of close on 25% to Amonite, a film company, and Cross Country Trains.

Richard Pearce of TCN commented: “The vibrant brand profile that B&E House creates will attract a wider audience of office and leisure tenants to the site facilitating our vision for the whole scheme.”

Pearce created TCN in 2006 in partnership with TCN Urop of the Netherlands. The expansion moved up a gear when it bought Express Parks Development the following year and it started the policy of introducing the European model of developing and managing innovative real estate projects in conjunction with private and public partners.

Aerium sees the chance

Far from being in the doldrums, Bristol is attractive enough to pull in a major investment dealfrom a European fund. Aerium, the European fund manager, has paid the Administrators, PWC, £83 million for One Glass Wharf, Temple Quay. The property, completed in 2010 is a sizeable 20,083 sq.metres (216,172 sq.ft.) of prime offices on five floors and is 81% let to the law firm Burgess Salmon for 20 years. Provide the top quality buildings, and investors will buy.

The empty space is subject to a seller’s guarantee of over 5 years. Now DTZ and Alder King will market this space. FranckRuimy of Aerium said: “This is a significant purchase outside the central London market of a very high quality, trophy asset. All core UK business markets are beginning to show a reduction in the supply of prime stock coming onto the market, which still further supports the underlying demand for space in this type of asset and therefore steady rents.” The fund is backed by Middle Eastern investors.

Winning Design?

A reminder of the quality of the new developments in Salford Quays has come with the short listing of the MediaCity footbridge for an award by the Institution of Structural Engineers. The structure is a cable swingbridge providing pedestrian access over the Manchester Ship Canal into the heart of MediaCity.

According to the organisers of the award for structural and engineering excellence, the footbridge has been designed to respond to the particular geometrical constraints of its location. It anticipates future redevelopment of Trafford Wharf to the south and in conjunction with the existing Lowry Bridge enhances pedestrian links for the area as a whole. The results of the competition for the award, which has been in operation since 1966, will be announced in November.

The impact of MediaCity on Greater Manchester has been highlighted by Property Secrets, an investment organisation. It listed a number of positive points for the city, namely: The movement of thousands of BBC personnel from London is having an impact on the residential market and a range of media and creative organisations; A 2.7% increase in the turnover of retail businesses in the year to March, according to the data organisation CityCO; A 12.8% rise in passenger numbers at Manchester Airport between February and March; A report by Knight Frank dubbing Manchester as one of the UK’s best cities with the strongest investment potential. Alan Forsyth of Property Secrets said: “Demand for new properties in prime locations is experiencing strong growth and increased job opportunities, such as in Manchester, has meant an increased number of people buying properties in the city.”

A similarly upbeat analysis of the impact on the local office market has come from officebroker.com. It reports increased demand from local businesses for office space in the area through the impact of 2,500 employees moving into MediaCity. Jim Venables of officebroker.com said: “As a company we have witnessed an increase in demand in and around Salford Quays since the beginning of the year, a rise which is reflected in the personal experiences of many local providers we work alongside.” Mark Canning of Canning O’Neill said: “Our experience backs up the optimistic views of Salford Quays where, for example, half the Metro building has now let with Insight taking 1,672 sq.metres (18,000 sq.ft.).” The impact of MediaCity has brought a host of lettings at Digital Park and Digital World Centre. For example, Swiss Post has taken Unit 3 at Digital Park as an extension to its existing facility. Canning said of another new scheme, the Soapworks development, that “we are seeing considerable interest from potential occupiers.”