With demand still very high for office space in Bristol, collecting a return through property has never been so tempting for the first-time property developer. Bristol has a vacancy rate of less than 4% and a chronic shortage of city-centre office space, particularly for smaller occupiers. Similarly, the drag on the housing market means rented residential properties are in high demand with upward pressure on rents.
PAI members Vickery Holman have offices in Truro, Plymouth, Exeter and Bristol. ‘We’re seeing first-time developers getting in on the action in higher numbers in Bristol than elsewhere.’ commented Paul Matthews, Bristol-based surveyor for Vickery Holman. ‘While commercial property can be a very wise investment, it is also beset with traps for the inexperienced property speculator. I provide a valuation service for banks and investment companies and its quite apparent when I’m asked to look at properties that novice investors / developers have acquired thinking they would make a tidy return quickly.’
First-time property investors are often business owners looking to invest as part of their Self Invested Pension, or they are small developers converting run down houses into flats and smaller buildings into offices. Many of these buyers will need finance from their bank, who will ask for an expert valuation as part of the funding process. Banks can be very cautious about developers with no track record in property development, usually because inexperienced developers under-estimate the costs involved in conversion and over-estimate the profits they will make. The quality of the finished product in paramount if the scheme is to be successful.
‘People often fall into the trap of thinking that they must keep professional costs to a minimum so they don’t involve a surveyor, and they cut corners with the quality of the conversion. In fact, paying for expert advice early on in the project can save money later and will certainly provide more realistic cost of works projections which will aid funding. Quality is everything when it comes to a valuation. If a property has been converted with care and to an obviously high standard, the sale price and the rents will be higher, while maintenance costs will be lower. It really is a case of ‘buy cheap, buy twice’. It’s a false economy to try to do a cheap conversion and more experienced developers know that.’ explained Paul Matthews.
While the shortage of flats and offices in Bristol is good news for property developers, and looks likely to stay that way throughout 2019, it’s still a market which rewards quality over speed. There are plenty of opportunities for people to benefit from the high demand, short supply scene – but only for the well-prepared.