‘Shortage of office space is holding city back’
A REPORT by property consultancy Knight Frank says a limited supply has held back Cardiff’s office take-up during the year so far.
The previous year had been a record one for office investment, but in 2018 investment opportunities have become limited.
And there is only one new Grade A office space scheduled for completion in 2019.
Knight Frank’s annual Cardiff Report, released this week, showed office take-up of 300,000 sq ft in the first three quarters of the year - 20% down on the long-term average for the period, with the lack of new office stock a particular factor.
Transactions of Grade A offices accounted for just 11% of deals in the third quarter (Q3), compared to 35% in 2016 and 67% on 2017.
Matt Phillips, managing partner of Knight Frank’s Cardiff office, said: “The restrictions on supply have put pressure on rent and incentives as competitive forces have built up through the year.”
Lettings at Two Central Square in 2017 established Cardiff’s prime office rent at £25 per sq ft and with all Grade A lettings this year achieving close to this figure, current forecasts indicated that rents would rise with the next wave of development in 2020-21 to £27 per sq ft.
According to Knight Frank’s Cardiff Report, Admiral Insurance’s letting of 65,091sq ft at Number 3 Capital Quarter was the headline deal of 2018 so far. Admiral was at capacity in its Ty Admiral HQ on Bridge Street and the new lease retained one of Cardiff’s most significant employers and the only FTSE 100 company headquartered in Wales.
The largest single office deal in 2018 was the purchase of Woodland House in north Cardiff, which was acquired by Cardiff & Vale University Health Board to house its administrative functions. The former Tesco House was occupied by the supermarket for 25 years before it vacated to consolidate operations in Dundee.
Other notable Grade A transactions included the 11,000 sq ft lease taken by publishing firm Which? at 3 Capital Quarter and the 9,977 sq ft groundfloor lease agreed by KeolisAmey at St Patrick’s House. In addition, Knight Frank had moved to new offices in 3 Assembly Square at Parmer Cardiff Waterside.
Mr Phillips commented: “Grade A availability had risen at the Q3 point with the completion of Number 3 Capital Quarter to 167,995 sq ft - 24%