201620172018 - Alder King

1 201820172016 Market Monitor2018 South West of England and South Wales Property ReviewAlder King Market Monitor 20181 Contents3 Key Market Trends5 Key Regional Transactions 7 Bath9 Bridgwater11 Bristol13 Cardiff15 Exeter17 Gloucester19 Newport21 Plymouth23 Swindon25 Taunton27 Truro29 Residential Development Land30 PlanningCGI of 3 Glass Wharf, Bristol. Courtesy of Salmon Harvester South West CentresOffice and Industrial Demand and Supply (000 sq ft)YearOffice Demand Office SupplyIndustrial DemandIndustrial Supply20171,7192,4905,1523,57820162,0232 ,7248,4273,69420151,9093,2355,8524,32020 142,2073,8624,9695,69520131,4814,7614,54 46,815 Cardiff & Newport Office and Industrial Demand and Supply (000 sq ft)YearOffice DemandOffice SupplyIndustrial DemandIndustrial Supply20177681,0731,11195720167621,18372 51,34020157481,2091,0081,45920146461,360 9832,10220133781,3459572,088 Simon Price Head of Agency Alder KingForewordMarket Monitor reviews the 2017 occupational and investment markets in 11 key centres in the South West of England and South key features of the market include.

2 The region s commercial property market proved resilient in 2017 and outperformed expectations. The occupational market will remain robust with real rental growth being driven across most sectors by strong demand, reducing supply and a subdued appetite for speculative development. 2017 witnessed a record volume of investment transactions, mirroring trends nationally. Strong demand linked to the positive occupational backdrop maintained and drove values, with the industrial/logistics sector being the standout performer. Ongoing change in structure, occupier requirements and consumer preferences will continue to be felt across the retail, logistics, office and residential sectors in 2018. Demand for short term and strategic residential land remains strong.

3 The Build to Rent market continues to build momentum, albeit slowly, but progress is expected in 2018 with a number of major institutionally funded schemes coming to site. The major challenge of meeting housing demand will remain a key theme in 2018. The reluctance to roll back green belt will this year be tested at policy level but we expect the themes of higher density and more intense use of existing brownfield land to remain the primary response. We anticipate another strong performance across the region from the property market in King Market Monitor 20183(sq m)sq ftKey(334) 31(86) 8(350) (269) 25(188) ( ) (172) 16(191) (129) 12(145) (94) (94) (86) 8(86) 8(86) 8(81) (59) (59) ( ) (75) 7(97) 9(161) 15(162) 15(237) 22(156) (210) ( ) 20( ) ( ) (194) 18(178) (108)

4 100108642industrial headline rent psf03525302015105in town headline rent psf03525302015105out of town headline rent psfSwindonGloucesterNewportBristol CardiffBridgwaterExeterPlymouthTruroTaun tonSwindonGloucesterNewportBathBristol CardiffBridgwaterExeterPlymouthTruroTaun tonSwindonGloucesterNewportBathBristol CardiffBridgwaterExeterPlymouthTruroTaun tonOfficesIndustrialKey Market Trendsoccupational summary Total take-up in key South West centres decreased in 2017 compared to the record figures achieved in 2016. This is largely due to the lack of good quality immediately available supply, limited large scale speculative development and the loss of consented sites to alternative uses. The majority of centres will support speculative development.

5 St Modwen, St Francis/iSec, Chancerygate, KMW, Richardson Barbury and Rockhaven have all started or are about to start schemes which will deliver circa 900,000 sq ft in Bristol alone. Demand is increasingly focused on better specified space with new build activity now currently underway in Bristol, Gloucester, Wellington, Bridgwater, Swindon and Plymouth. With limited second hand space coming to market, mid-range occupiers are increasingly only able to satisfy their needs via the design and build route. There has been a continuing improvement in rentals, lease durations and capital values in the majority of centres, with the potential for further growth. Severnside and the North Bristol motorway corridor has reinforced its regional importance as evidenced by Amazon and DHL s recent acquisitions.

6 With the removal of Severn Bridge tolls in December 2018, we anticipate the South West logistics demand triangle will be redefined to include the M4 corridor from the two bridges west to Newport. Key areas of growth continue to come from occupiers in the logistics sector and particularly those involved with internet fulfilment, with an increasing number of enquiries from engineering and added value engineering summary Some key regional centres saw a step change in headline rental levels in 2017. This is likely to continue through 2018 with Bristol predicted to set a new record city centre rent of 35 per sq ft. Supply remains tight with very limited new build development across the region. New speculative development is currently only underway in Bristol, Cardiff and Exeter.

7 The supply of available office space across the South West s key centres has fallen by 48% since 2013 due to strong demand, the conversion of poorer quality stock to alternative uses and a lack of new development. During 2018 the level of take-up in key regional centres including Bristol, Bath and Exeter will remain constrained by the lack of modern flexible space now available in each market. Changing styles of occupation will continue to impact on take-up and office design/specification. We predict strong activity in the serviced/managed office sector with co-working and flexible occupation becoming increasingly popular. Many of the leading market providers are actively seeking opportunities across the region. There is continued strong take-up by the public sector with several large requirements active across the region.

8 Some locations are witnessing a positive impact on out of town business park take-up as a result of reducing city centre supply and this trend looks set to continue in Price | T 0117 317 1084 | E Ridler | T 0117 317 1071 | E KingMlaktSource: Costar (2,206) 205(452) 42(2,153) 200(2,422) 225(2,260) 210(1,776) 165(1,076) 100(592) 55(1,615) 150(1,130) 105(1,184) (183) 17(323) 30( ) 40(377) 35(377) 35(269) 25(269) 25(269) 25(301) 28(205) 19(215) 20030020025015010050zone A headline rent psf01,000800600400200value of investment transactions ms05030402010out of town headline rent psfSwindonGloucesterNewportBathBristol CardiffBridgwaterExeterPlymouthTruroTaun tonSwindonGloucesterNewportBathBristol CardiffBridgwaterExeterPlymouthTruroTaun tonSwindonGloucesterNewportBathBristol (Cabot Circus)CardiffBridgwaterExeterPlymouthTr uroTauntonInvestmentRetail & Leisurezone A headline rent Consumer confidence and sales volumes remained encouragingly robust throughout the majority of 2017.

9 However 2018 is likely to see further pressure on retailers costs. In addition household spending will continue to be squeezed. Existing property portfolios will be rationalised through closures, relocations and right sizings. Online sales are growing but retailers remain committed to bricks and mortar representation. There is a reasonable level of occupational demand for prime locations in the larger retail centres throughout our regions. Demand in secondary locations remains subdued. Leisure and food and beverage uses continue to underpin traditional town centre pitches and will be of growing importance in 2018. Major retail-led expansions are being promoted at both Cabot Circus and The Mall at Cribbs Causeway. Further clarity on delivery timescales will emerge throughout 2018.

10 Elsewhere new city/town centre developments are planned in Gloucester, Taunton and of town headline rent Out of town occupational demand for well located parks remains robust. There is a growing representation from discount food, leisure and food and beverage operators. New entrants include the likes of Bunnings which is looking for new sites across our regions. There is an appetite from developers for new opportunities. Mero Retail Park has opened in Bath and Next are on site at Marsh Mills, Plymouth. Developments are being promoted in Truro, St Austell, Exeter and Bristol. Lidl and Aldi continue to dominate the foodstore sector. Others are cautiously looking at new opportunities predominantly in a convenience format. However Morrisons is on site in Abergavenny and will open a 25,000 sq ft net store in early market summary National investment transactional volumes recorded significant growth in 2017 and the South West and South Wales region followed this trend with an estimated increase of 127% on the volume recorded in 2016.