Bristol city centre has been transformed in recent years by the conversion of dated office buildings into stylish student accommodation and residential flats.
As director of the Development Consulting and Agency Team at Colliers International, I have been involved in a number of office-to-residential sales and potential transactions, for example Kenham House on Wilder Street and, this year, Wilder House in Stokes Croft which attracted considerable attention from developers when we brought it to the market.
But now it seems the end of Bristol’s office-to-residential conversion boom could be sight or is at least slowing.
This is the result of two factors, namely diminishing supply of suitable stock, and increasing secondary office values in Bristol city centre.
The two are very much connected, as the conversion of commercial buildings for residential use, has lowered the overall supply level and driven office values higher.
Only two years ago good Grade B office rents were typically £18.50 per sq ft. Now there are some that have achieved £27. Over the same period best ‘Grade A’ offices rents remained at just below £30 per sq ft.
It is therefore more likely that appropriately located secondary office buildings will be retained in office use than a couple of years ago.
Most of these buildings are likely to be geared towards the Technology Media and Telecoms (TMT) sector which is growing strongly in the city with around 25 per cent of the Bristol City Centre take up going to this sector. In turn, this will restrict the supply of buildings with potential for residential conversion.
Looking ahead at future development in Bristol city centre, my prediction is that there will be greater emphasis on new and mixed-use development.
This is because, while opportunities for Permitted Development conversions from offices to residential, where planning permission is not needed or is simpler to achieve, have become much more limited in Bristol, yet the demand for city living flats continues unabated.
The question now is whether demand for offices in Bristol city centre will result in some of the longstanding undeveloped office sites coming forward for new build residential development.
Although the Gross Development Values generated by well-let new offices at circa £600 per sq ft exceed the general tone of residential sales values, many of the undeveloped office sites in the City are chasing what may prove to be illusive office pre-lets.
At the same time residential values continue to grow with competing potential, on some sites, for further student and/or build to rent schemes. On some sites I anticipate this will lead to greater mixed use development as owners and funders hedge their development bets.
Chris Dawson is director of the Development Consulting and Agency team in the Bristol office of Colliers International