What is hindering your market at the moment?

Higher interest rates have had a significant impact on shaping occupier decisions regarding business investment and investor/developer appetite in new schemes. The market was visibly slower in 2023 and this impacted office take-up figures in Bristol.

What opportunities are you seeing in your market at the moment?

There is opportunity for businesses to continue to ‘right size’ their office space as their lease events approach and upgrade to more modern and sustainable accommodation.

For investors, there is plenty of opportunity for them to upgrade and improve the value of their assets, particularly as prime city centre rents continue to rise. As inflation stabilises and interest rates hopefully continue to reduce further in the Autumn, investment decisions will become much easier for both investors and businesses. The office market has already started 2024 in a much stronger position than 2023.

What’s the biggest change you have seen in your sector throughout your career?

The biggest change I have seen in the office sector throughout my career has been the evolution of office fitouts. When I started working in the industry, the legal sector was characterised by enclosed cellular offices, often with partners having their own workspaces. Gradually, open-plan layouts became the norm, featuring suspended ceilings and LG3 lighting. Now many offices have the look and feel of a coffee shop with exposed services, abundant collaboration spaces, green walls, and plants. Some even include recreational amenities like pool tables (Colliers Bristol), bars and top-tier coffee machines. Desks have become smaller, physical files are almost extinct and everyone typically works with a laptop and multiple monitors.

Showers, lockers, and drying facilities, once considered luxuries, are now standard expectations of occupants. Landlords have adapted by fitting offices with boardrooms, meeting spaces, phone booths, breakout areas, pre-installed furniture and broadband, perpetuating this ongoing evolution.

What has surprised you the most about your sector post pandemic?

The Bristol office market has demonstrated remarkable resilience. When the UK lockdown was imposed in 2020, many employees scarcely set foot in their offices for the next 12-months. Despite this, office take-up and rents continued their upward trajectory.

Between 2020 and 2022, the office occupancy in Bristol city centre remained more than 500,000 sq ft. Although there was a decline in 2023, 2024 started on a very positive note. Prime city centre rents increased from £37.50 per sq ft in 2020 to £46 per sq ft in Q1 2024, marking an impressive 22.7% increase over four years. At a time when some were questioning the future of the office market, few could have predicted not only a double-digit percentage increase in prime rent, but a surge of over 20%. While the hybrid model of working is here to stay, the invaluable knowledge transfer that occurs within a physical office environment is essential. The ability to facilitate the training of new colleagues and foster relationships is significantly enhanced when you are together.

How would you summarise/characterise your sector over the past 12-18 months?

Like a pendulum swinging, in terms of office take-up in Bristol city centre – up and down. Despite the resilience of the office market post -pandemic, 2023 was a challenge for both the investment and occupational sectors. The effect of high inflation coupled with an increase in interest rates effectively meant that it was like the slow-motion button had been pressed, as decision making took much longer.

As agents, we often express frustration over deal progress, but last year’s sluggishness was particularly evident, with city centre take-up nearly 30% below the five-year average.

However, 2024 has commenced on a much brighter note, with a new prime rent of £46 per sq ft set at Candour's (now Trammell Crow) Welcome Building and take-up surpassing last year's figures by over 50% for the same period.

What is hindering your market at the moment?

Higher interest rates have had a significant impact on shaping occupier decisions regarding business investment and investor/developer appetite in new schemes. The market was visibly slower in 2023 and this impacted office take-up figures in Bristol.

What opportunities are you seeing in your market at the moment?

There is opportunity for businesses to continue to ‘right size’ their office space as their lease events approach and upgrade to more modern and sustainable accommodation.

For investors, there is plenty of opportunity for them to upgrade and improve the value of their assets, particularly as prime city centre rents continue to rise. As inflation stabilises and interest rates hopefully continue to reduce further in the Autumn, investment decisions will become much easier for both investors and businesses. The office market has already started 2024 in a much stronger position than 2023.

​ What’s the biggest change you have seen in your sector throughout your career?

The biggest change I have seen in the office sector throughout my career has been the evolution of office fitouts. When I started working in the industry, the legal sector was characterised by enclosed cellular offices, often with partners having their own workspaces. Gradually, open-plan layouts became the norm, featuring suspended ceilings and LG3 lighting. Now many offices have the look and feel of a coffee shop with exposed services, abundant collaboration spaces, green walls, and plants. Some even include recreational amenities like pool tables (Colliers Bristol), bars and top-tier coffee machines. Desks have become smaller, physical files are almost extinct and everyone typically works with a laptop and multiple monitors.

Showers, lockers, and drying facilities, once considered luxuries, are now standard expectations of occupants. Landlords have adapted by fitting offices with boardrooms, meeting spaces, phone booths, breakout areas, pre-installed furniture and broadband, perpetuating this ongoing evolution.

What has surprised you the most about your sector post pandemic?

The Bristol office market has demonstrated remarkable resilience. When the UK lockdown was imposed in 2020, many employees scarcely set foot in their offices for the next 12-months. Despite this, office take-up and rents continued their upward trajectory.

Between 2020 and 2022, the office occupancy in Bristol city centre remained more than 500,000 sq ft. Although there was a decline in 2023, 2024 started on a very positive note. Prime city centre rents increased from £37.50 per sq ft in 2020 to £46 per sq ft in Q1 2024, marking an impressive 22.7% increase over four years. At a time when some were questioning the future of the office market, few could have predicted not only a double-digit percentage increase in prime rent, but a surge of over 20%. While the hybrid model of working is here to stay, the invaluable knowledge transfer that occurs within a physical office environment is essential. The ability to facilitate the training of new colleagues and foster relationships is significantly enhanced when you are together.

How would you summarise/characterise your sector over the past 12-18 months?

Like a pendulum swinging, in terms of office take-up in Bristol city centre – up and down. Despite the resilience of the office market post -pandemic, 2023 was a challenge for both the investment and occupational sectors. The effect of high inflation coupled with an increase in interest rates effectively meant that it was like the slow-motion button had been pressed, as decision making took much longer.

As agents, we often express frustration over deal progress, but last year’s sluggishness was particularly evident, with city centre take-up nearly 30% below the five-year average.

However, 2024 has commenced on a much brighter note, with a new prime rent of £46 per sq ft set at Candour's (now Trammell Crow) Welcome Building and take-up surpassing last year's figures by over 50% for the same period.

 

What are your predictions for the next 12-18 months, in your sector?

I anticipate a further jump in prime rents in Bristol city centre from the high of £46 per sq ft in Q1 to above £48 per sq ft this year.

Reaching the milestone of £50 per sq ft seems entirely feasible with the next wave of new office developments. The level of take-up will continue to surpass the low figures witnessed in 2023, driven by increasing economic optimism and a greater willingness among business leaders to invest in office spaces.

The legal and tech sectors have been driving the office market over the last few years and I can see this continuing, with several large lease events on the horizon. Additionally, businesses are expected to commence their searches earlier to secure the most suitable ESG-compliant offices.

Within your sector, how does Bristol (or SW in general) compare to other regions (and/or to London)?

I will start by noting that Bristol leads the way in prime rent among the big six cities at £48 per sq ft per annum. This is linked to the limited office development in Bristol over the last decade compared to many other cities. Additionally, over a million sq ft of office space in Bristol has been converted to alternative uses since the relaxation of change of use regulations in 2013.

Currently, Bristol has just over 1.2 million sq ft of available office space. Across the UK, the professional services sector has been driving demand for office space.

The changing demographic within the UK has resulted in a situation where, for the first time, there are more people of pensionable age than there are children under the age of sixteen. This, coupled with the aging workforce in the construction industry, both within the contracting and consultancy markets, means that it is an alarming time for the industry. Satisfying labour workforces and recruitment demands has become a very real and pertinent issue for both contractors and consultancies.

Recruiting people into the industry is not a new challenge, but the changing demographic of the country is exacerbating the problem, requiring immediate attention. ​

Challenges caused by the construction skills shortage

It is essential to view these challenges within the broader context of the changing modern world, including increased flexible working, EU worker policy, the implementation of modern construction methods, and the efficiencies being driven through these technologies.

However, in the short to medium term, the aging workforce is straining the labour supply, leading to increasing labour costs. Wages have risen by 6% from a shortage of skilled tradespeople.

This is putting upward pressure on outturn construction costs as clients and developers strive to make their schemes viable. ​ Contractors are grappling with inflation, supply chain disruption, and a diminishing supply of workers to choose from as costs increase. Some contractors have even been forced to cease trading due to these challenges. All this has been too much for some contractors and we have seen some notable companies cease trading.

In terms of growth, the UK will look to construction to kickstart the economy in Q3 2023 and beyond. However, the drain of resources will put sustained growth at risk and make it difficult to meet the aforementioned numbers over the next few years.

Construction has historically leaned on workers from the European Union to satisfy this demand but according to the ONS, between 2020 and 2017 there was a 42% decline in the number of EU workers, compared to just a 4% drop from that of UK workers.

It remains to be seen what the effect of the ‘Back to Work’ budget will have on the industry after the government has relaxed migration requirements for key workers and whether this will mitigate some of this decline.

What are some of the schemes trying to help?

The government is trying to do its bit by the introduction of schemes to flood the younger end of the industry with the next generation. One such initiative is the introduction of the T Level in construction. This new technical qualification can be pursued after GCSEs and is the equivalent of 3 A Levels. Schemes like this can be used in collaboration with companies to meet their resourcing requirements and prepare the apprentices for the workplace. The courses are two years long and include nine weeks minimum working with an employer as an industry placement.

Although similar to apprenticeships, T levels will be more classroom-based, and give young people a route to academic achievement in a technical role.

In addition to the T level, there is the Construction Skills Fund, funded by the CITB, which aims to set up training hubs across the country. The funding supports live projects, providing to onsite experience to nearly 20,000 participants. Major contractors Wilmott Dixon, Balfour Beatty, and Morgan Sindall are just some of the major players in this scheme and have directly hired individuals for various roles.

Opportunities to help mitigate the skills shortage ​

The skills shortage is also impacting the consultancy sector of the industry. There is still a large proportion of the workforce that is aging, and the industry needs to do more to attract young talent.

The consultancy workforce has still seen the effects of Brexit and Covid 19; the exodus of EU workers and ‘big resignation’ of the older workforce after the pandemic. This is compounded by the globalisation of the construction industry and the attractiveness of international markets such as Australia, New Zealand, and USA in drawing talent away from UK consultants.

To address this, the Colliers Bristol Project and Building Consultancy team are actively contributing to rebalancing the scales by having over 25% of the team composed of apprentices. Two of them are pursuing their education at the University College of Estate Management, while the other two are enrolled in the local University of the West of England. ​

Additionally, there are a further two apprentices within the Bristol office that are part of the larger Colliers ‘Emerging Talent’ programme’. ​

Applicants are being encouraged for the next intake in 2024 and applications will open in autumn 2024.

In conclusion, there is a growing recognition within the industry of the challenges we currently face, particularly in the short to medium term, concerning the skills shortage. Initiatives like the government's T level and CITB Construction Skills Fund serve as positive starting points. However, it is now the responsibility of companies to drive their own programs, such as Colliers' Emerging Talent, to address these challenges.

The industry must adopt a cohesive and collaborative approach to: Attract skilled workers already working elsewhere in the industry

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The changing demographic within the UK has resulted in a situation where, for the first time, there are more people of pensionable age than there are children under the age of 16. This, coupled with the aging workforce in the construction industry, both within the contracting and consultancy markets, means that it is an alarming time for the industry. Satisfying labour workforces and recruitment demands has become a very real and pertinent issue for both contractors and consultancies.

These are the numbers that the UK construction industry is faced with currently.

Recruiting people into the industry is not a new challenge, but the changing demographic of the country is exacerbating the problem, requiring immediate attention. ​

Challenges caused by the construction skills shortage

It is essential to view these challenges within the broader context of the changing modern world, including increased flexible working, EU worker policy, the implementation of modern construction methods, and the efficiencies being driven through these technologies.

However, in the short to medium term, the aging workforce is straining the labour supply, leading to increasing labour costs. Wages have risen by six per cent due to a shortage of skilled tradespeople.

This is putting upward pressure on outturn construction costs as clients and developers strive to make their schemes viable. ​ Contractors are grappling with inflation, supply chain disruption, and a diminishing supply of workers to choose from as costs increase. Some contractors have even been forced to cease trading due to these challenges. All this has been too much for some contractors and we have seen some notable companies cease trading.

In terms of growth, the UK will look to construction to kickstart the economy in Q3 2023 and beyond. However, the drain of resources will put sustained growth at risk and make it difficult to meet the aforementioned numbers over the next few years. ​

Construction has historically leaned on workers from the European Union to satisfy this demand but according to the ONS, between 2017 and 2020 there was a 42 per cent decline in the number of EU workers, compared to just a four per cent drop from that of UK workers.

It remains to be seen what the effect of the ‘Back to Work’ budget will have on the industry after the government has relaxed migration requirements for key workers and whether this will mitigate some of this decline.

 

What are some of the schemes trying to help?

The government is trying to do its bit by the introduction of schemes to flood the younger end of the industry with the next generation. One such initiative is the introduction of the T Level in construction. This new technical qualification can be pursued after GCSEs and is the equivalent of three A Levels. Schemes like this can be used in collaboration with companies to meet their resourcing requirements and prepare the apprentices for the workplace. The courses are two years long and include nine weeks minimum working with an employer as an industry placement.

Although similar to apprenticeships, T levels will be more classroom-based, and give young people a route to academic achievement in a technical role.

In addition to the T level, there is the Construction Skills Fund, funded by the CITB, which aims to set up training hubs across the country. The funding supports live projects, providing to onsite experience to nearly 20,000 participants. Major contractors Wilmott Dixon, Balfour Beatty, and Morgan Sindall are just some of the major players in this scheme and have directly hired individuals for various roles.

Opportunities to help mitigate the skills shortage ​

The skills shortage is also impacting the consultancy section of the industry. There is still a large proportion of the workforce that is aging, and the industry needs to do more to attract young talent.

The consultancy workforce has also seen the effects of Brexit and Covid 19; the exodus of EU workers and ‘big resignation’ of the older workforce after the pandemic. This is compounded by the globalisation of the construction industry and the attractiveness of international markets such as Australia, New Zealand, and USA in drawing talent away from UK consultants.

To address this, the Colliers Bristol Project & Building Consultancy team are actively contributing to rebalancing the scales by having more than 25 per cent ​ of the team composed of apprentices. Two of them are pursuing their education at the University College of Estate Management, while the other two are enrolled in the local University of the West of England. ​

Additionally, there are a further two apprentices within the Bristol office that are part of the larger Colliers Emerging Talent programme. ​

Applicants are being encouraged for the next intake and applications will open in autumn 2024.

In conclusion, there is a growing recognition within the industry of the challenges we currently face, particularly in the short to medium term, concerning the skills shortage. Initiatives like the government's T level and CITB Construction Skills Fund serve as positive starting points. However, it is now the responsibility of companies to drive their own programs, such as Colliers' Emerging Talent, to address these challenges.

The industry must adopt a cohesive and collaborative approach to:

Attract skilled workers​ alreadyworking else where in the industry

Attract people​ back to the industry that have now left

Shortening qualification periods​ through intense training​ to meet demand quicker

Improving​ the retention of staff​ within the industry

Striving to increase productivity​ through innovation​

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Alex Vacher​
Director
Cost Management alex.vacher@colliers.com

Alex is ​ Director and Chartered Quantity Surveyor with over 10 years of industry experience in Cost Management and Quantity Surveying.

Alex is passionate about delivering excellent commercial advice for our clients for them to obtain best value. His focus is on how he can apply commercial acumen to add value for our clients through all stages of the project.

As the head of the Cost Management team at our Bristol office, Alex assumes the responsibility of leading a highly skilled and dedicated team, ensuring the delivery of outstanding results for our esteemed clientele.

 

Alex Vacher​
Director | Cost Management

Alex is ​ director and Chartered Quantity Surveyor with over 10 years of industry experience in Cost Management and Quantity Surveying.

Alex is passionate about delivering excellent commercial advice for our clients for them to obtain best value. His focus is on how he can apply commercial acumen to add value for our clients through all stages of the project.

As the head of the Cost Management team at our Bristol office, Alex assumes the responsibility of leading a highly skilled and dedicated team, ensuring the delivery of outstanding results for our esteemed clientele.