• Swindon & Wiltshire Property
• Tuesday February 6 2024
• Author Name: Peter Davison

South West commercial property market poised for bounce back in 2024 – Alder King

The South West commercial property market is poised to bounce back in 2024 after a subdued performance throughout most of 2023, according to the annual Market Monitor from Bristol-based commercial property expert Alder King.

After several years of above-average take-up, property occupiers, investors and developers responded to the unsettled economic conditions of the past 18 months by taking a more cautious and considered approach to their property decisions in 2023, says the report.

As a result, the market recorded reduced transaction volumes and saw limited new development in both the office and industrial sectors.

However, there was encouraging evidence in the final quarter of the year that occupier enquiries and transaction levels were rallying, suggesting that recent falls in inflation and interest rates were having a positive impact on corporate decision-making, say the report’s authors.

In Bristol city centre, for example, the office market rebounded strongly at the end of 2023, with Q4 take-up accounting for 46 per cent of the full year total.

Simon Price, head of agency at Alder King, said: “2023 presented particularly challenging trading conditions for all sectors of the commercial property market, as it did for the wider economy.

“Office take-up in the South West ended the year 16 per cent down on the five-year average while industrial take-up, constrained more by a lack of immediately available supply and limited new development starts than a lack of demand, ended 26 per cent below the five-year average.

“Despite last year’s disappointing figures, demand remains robust, with office and industrial occupiers competing for an increasingly limited amount of prime space.

“Looking ahead, this means that many occupiers will have to look at pre-lets and pre-sales to secure the quality space they need.

“Informed occupiers will also understand the need to pay rents and prices at a level to support viability. We therefore expect further increases in office and industrial headline rents and capital values over the course of this year in prime locations such as Bristol, Cardiff, Exeter, Bath and Gloucester.

“With all eyes focused on prime office space with the best ESG features, there is reduced demand for much of the poorer quality, secondary office space, creating a very polarised market. Much of this older space will be repurposed over the next three to five years for alternative uses.”

In the retail sector, transaction levels were at their highest level since the end of the pandemic, driven by the food and beverage, and health and beauty sectors. The region’s retail parks continue to outperform high street locations.

The region’s investment market was also impacted by the wider economic volatility of the past 18 months. The severity of commercial property re-pricing resulted in a significant mismatch between vendor and purchaser pricing aspirations, curtailing activity and leading to a fall in transaction volumes.

“The outlook for 2024 is more positive,” continued Price. “Investor sentiment is already strengthening and pricing is beginning to realign buyer and seller expectations. Opportunistic buyers would be wise to take advantage of the current subdued pricing and look to reposition assets.”

Pictured: The fourth and final phase of Paintworks, a mixed-use development in Bristol’s creative quarter