Viewpoint from a regional investment agent: As I sit in my actual office, in front of my actual PC, I reflect on the first half of 2020 as a Bristol based investment agent, and conclude it was pretty much as expected and reflective of the UK investment market as a whole. In short, it was dire.
However, although investment volumes are down on corresponding figures from 12 months ago (in 2019, investment volumes in Bristol totalled £650m; currently, it stands at circa £70m) we should certainly have a feeling of optimism for the second half of the year. It’s actually not as bad as it could be.
In Bristol, we’ve got plenty of irons in the fire. Lockdown deals rumoured to be under offer include The Assembly, a 200,000 sq. ft grade A office building that has been pre-let to BT plc. Sitting at £140m, it will be Bristol’s biggest ever office investment deal and, at 4.5% net initial yield, pricing is at pre-covid levels.
Offices remain in demand in the regional city, and another significant deal that transacted this year is Halo at Finzels Reach. It’s a 116,000 sq. ft grade A office building, not yet built, which is being forward-funded by Tesco Pension Fund at circa 5.6% net initial yield. Some 74,000 sq. ft has been pre-let to lawyers Osborne Clarke, who are moving from nearby Temple Quay, but 42,000 sq. ft remains vacant and available to let once completed, meaning more deals to come in the months ahead.
A crop of naysayers are currently predicting the demise of the office. However, these two substantial regional investment deals, and the fact that the Bristol office take-up for the first half of 2020 outperformed the same period last year, suggest to me that these forecasts are a tad premature.
As the UK government commences a campaign to encourage staff back to their workplace, the British Council for Offices recently published a report suggesting that in the South West and Wales only 16.86% of members canvassed intend to work from home after lockdown. Professionals are missing the structure and productivity that an office brings and, as Pierre Jacquot recently reported in this very journal, “we remain ‘social animals’ attached to our workplace”.
Like Pierre, I agree that agile and remote working is of course important as individuals consider their work-life balance after the lockdown. However, I foresee some backtracking to come from the major office occupiers, who hastily shed ties with their spaces or introduced longer-term home-working regimes in the immediate aftermath of lockdown. For example, Linklaters Solicitors boldly stated that all of its 5,300 staff can spend up to 50% of their working week at home, and Lloyds Banking Group, with 65,000 employees and a major employer in Bristol, stated that most of its staff have ‘effectively’ worked remotely. Perhaps, but is that happily? Profitably?
I am clearly biased. The surveying industry remains very much a people industry. As an agent, I thrive on chat, information, knowledge and property gossip, and couldn’t possibly do my job effectively while based entirely at home.
Absolutely, there will be changes to the way we work, and the office environment that we operate within. The market must naturally change and adapt to reflect a post-lockdown world, and we are of the firm view that, as people reoccupy offices and make operational decisions moving forward, expectations of their office space and its communal areas will change. As a result, we anticipate that the definition of true grade A office space will shift in the aftermath of coronavirus.