Research article

Future priorities

challenges ahead

Bristol's changing growth patterns will require new strategies


As the first half of this report has shown, Bristol has undeniably punched above its weight over the last decade. The drivers of this outperformance have been a successful fusion of branding, perception, industrial mix and regeneration.

Successful regeneration always delivers a period of out-performance, however that supra-normal growth is always finite.

Our research nationally shows that typically a successful regeneration programme can deliver three to five years of better than average growth before the location settles down and begins to show more normal levels of growth. This period of comfortable middle-age is in our opinion exactly where Bristol sits now, and it brings new challenges to the city.

The first major challenge is the hangover from a period of success.

Bristol is underweight in seven of the 12 UK growth sectors

FIGURE 5 | Bristol is underweight in seven of the 12 UK growth sectors
Source: Savills Research using Oxford Economics

Office supply under pressure

Our analysis of housing affordability in the city shows that house price growth has significantly outstripped that of wages, pushing homeownership further out of reach – the median house price to earnings ratio is now 9.1x, compared with 6.7x five years ago.

The tight housing market is already bringing stress to the city, indeed the ONS’s own data on wellbeing shows that Bristol’s residents have gone from being the 149th most anxious in the UK in 2011/12 to the 48th in 2016/17. This puts Bristol in line with major cities such as Manchester, Edinburgh and London where similar issues around housing affordability are rife.

Elsewhere in the city’s property market, there are other metrics that point to occupational stresses that have emerged.

Prime and refurbished office rents reached their highest ever level in 2017, and we are projecting that the lack of supply will push them even higher in 2018 and 2019.

The undersupply in the office market is in part linked to the recent strength of the residential market (37% of the city’s office stock has been converted through PDR). This is not expected to improve over the near term. Aurora, the city’s only speculative office development, is currently 75% pre-let or under offer and there is no further new development anticipated until Q1 2020. However, the low levels of development is not limited to Bristol and is symptomatic of a wider national issue.

Office development activity across the UK remains at very low levels due to developer and lender caution around Brexit. This should diminish as we move towards clarity in the early 2020s, and with office rents likely to be in excess of £35/sq ft by that date, the viability of office development in the city is assured so long as developer confidence returns and not all suitable sites are designated for residential uses.

Bristol City Centre office take-up

FIGURE 6 | Bristol City Centre office take-up
Source: Savills Research

Retail & industrial demand

Land availability for retail and industrial uses is a less pressing need for the future of Bristol, as we expect to see further consolidation in the retail sector as the structural change of internet shopping continues to reduce the number of stores that we need.

This will increase the need for logistics space across the region, though our analysis suggest it is well served for large logistics units, and the size of the city means there is limited need for ‘last mile’ logistics space.

Future urban development will however need to pay attention to the provision of light industrial spaces as part of a healthy and diverse economy.

Successful cities tend to have diverse and adaptive industrial structures. Bristol’s past success can definitely be attributed to its industrial mix and flexibility, but new challenges lie ahead.

A changing economy

While Bristol was very successful in attracting Financial Services occupiers during the boom years of that industry, banking and finance are no longer the growth powerhouses that they once were.

Figure 5 (above) looks at the sectors of the UK economy that are projected to show the strongest employment growth over the next decade, and compares that with Bristol’s current employment structure. Bristol is underweight in seven of the 12 growth sectors, and is arguably stronger in the less value-added segments.

This analysis points to a period of slower growth ahead for the city, as well as a need to adapt again to make the city more attractive to faster growing knowledge-economy businesses.

While it is difficult to generalise about what these businesses need, a universal motivator is the quality of the local workforce. This is where the biggest future challenge for the city is directly related to its past out-performance, in that the reducing affordability of housing in the city will not only inhibit its ability to retain new graduates, but also to attract in-movers.

Bristol is facing a period of slower growth, and needs to attract more knowledge-economy businesses

Savills Research

The key pinch point

Of course, this is not new news, and good progress is being made through the West of England Combined Authority to develop a more joined up approach to housing delivery across the area.

Increasing delivery will carry additional pressure following the 2018 revisions to the NPPF and the standard methodology for calculating housing need, which provides an uplift based on housing affordability; under the new method, housing need for the Combined Authority area would be set at 4,520 homes per annum.

The future strategy for the city has to continue to build on the urban regeneration successes of the past with a continued focus on delivering the right housing stock at the right price. Development needs to encompass continued delivery on urban brownfield, combined with sustainable growth beyond the existing urban area. Housing development must be supported by investment in transport infrastructure that connects homes with jobs.

While dealing with housing delivery and affordability in the city should not be the only focus for the future, we believe that it is the most pressing challenge for Bristol. Without this, the city’s labour pool will not be able to flex and adapt to the challenges of the next decade in the same way it has done so in the past.

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