Despite the turmoil in the global financial markets, and the much publicised credit crunch, the South West commercial property occupier market continues to remain healthy, with demand generally continuing to outstrip supply, and £1.7bn of investment transactions in the year to August 2007. According to GVA Grimley’s annual Economic and Property Market Review of the South West, the region is now reaping the rewards of significant capital investment through the recent unprecedented levels of development activity within the region’s cities and towns.

David Mace, joint regional senior partner at GVA Grimley incorporating Osmond Tricks, said that public sector initiatives are also playing their part in the region’s success stories. “Long awaited transport and infrastructure plans have been announced, and there are a number of strategic development sites being promoted to expand the employment base of the region.”

GVA Grimley’s Review outlines these key highlights:

• Demand for investment property in the region has been very strong, with £1.7bn being invested in the 12 months to the end of August 2007.
• South West economic growth exceeds the national average, with the region consistently one of the fastest growing regions in the UK, providing 7-8 per cent of the UK output over the last five years. In 2006, the economy grew by 3.1 per cent.
• Finance and business services, transport and communications continue to act as a major source of growth.
• Average retail rents showed the greatest growth during the second quarter of 2007, at 2.8 per cent pa. Average office rents showed 2.2 per cent pa growth, with industrial at 1.3 per cent.
• Confidence in the economic vitality of the region has been demonstrated with major retail-led developments in Bristol, Bath, Exeter and Plymouth.
• Bristol office headline rents reached a new high earlier this year when Burges Salmon agreed £27.50 psf at Temple Quay 2. This has triggered all new build schemes to raise their quoting terms to between £27psf and £28psf.
• The Bristol city centre offices occupier market continues to remain strong with well established firms looking to move in the foreseeable future. Total availability of Grade A stock in the city currently stands at around 219,000 sq ft. The largest ever single industrial pre-let concluded in the South West was agreed with Constellation Wines taking 859,150 sq ft at RD Park in Avonmouth.
• Industrial headline rents have been achieving record levels at £7.50psf, as prime supply has tightened, particularly within the north Bristol area. Freehold values have moved even further with levels as high as £120psf.

David Mace commented: “The credit crunch is now causing the investment market to slow down, and we will begin to see increased borrowing costs place pressure on property yields and values. However, we expect economic growth in the South West to remain in line with the national average , with output around 2.7 per cent this year, and 2.5 per cent over the coming two years.” 

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