More industrial sites needed as demand is outstripping supply
Associate with the Cardiff office of Cushman & Wakefield, Chris Yates, on the performance of south Wales’ industrial market
THE take-up of industrial property in south Wales in Q3 2018 totalled 780,000 sq ft, which, while representing a decrease compared to Q2 figures (1,014,000 sq ft of accommodation transacted between the months of April and June inclusive), still reflected a 14.2% increase on total annual take-up (year to date) when measured against the same stage in 2017.
The vast majority of space transacted during Q3 comprised Grade B and Grade C stock (making up some 90% of the quarterly total), a pattern which continues the theme of previous quarters and reinforces the welldocumented acute shortage of goodquality industrial accommodation in south Wales.
Overall supply in the region is now reduced to just over four million sq ft.
While 2016, 2017 and H1 2018 witnessed healthy take-up figures, when placed in context of both the fiveand 10-year annual take-up averages, it is apparent that this evident supply-demand imbalance (particularly when factoring the quality of the recorded total availability, which comprises mainly Grade C stock, which is deemed obsolescent by many of the longer-standing market requirements) will make sustaining such take-up levels very challenging unless more industrial stock is supplied into the regional market.
To address this supply shortage, it is important to highlight the significance that well-located, readily available development sites have, particularly along the M4 corridor where demand remains strongest. There are, however, green shoots on this front – for example, two recent examples of well-located edge-of-city sites that have come to market over the past quarter in Cardiff include land at Newlands Avenue in Wentloog (four acres) and Axis 32 in Coryton (2.5 acres), both targeting new-build opportunities in prime urban logistics locations.
There are also larger development sites now coming forward, namely ABP Business Park in Cardiff. Some 40 acres of outline-consented land capable of delivering up to 500,000 sq ft of industrial/warehousing accommodation within Cardiff Docks, just one mile from the city centre, with Associated British Ports, will shortly be released to market.
The second example is St Modwen’s Celtic Business Park in Newport, where a second phase of speculative development is understood to be taking shape, with a further circa 130,000 sq ft of accommodation proposed for late 2019.
In recent market news, it is also encouraging to note that marketing agents for the Sainsbury’s-owned 47-acre consented site at Gwent Europarks in Magor report strong levels of occupier interest, with the same now understood to be under offer.
In addition to this, the Welsh Government has also recognised the shortage of readily available development plots for industrial uses by taking more purposeful strides to release land within their ownership and add this to the development pipeline – for example, the outline planning consent for circa 750,000 sq ft of accommodation on 17.50 acres at Brocastle, Bridgend, together with 26 acres in Wentloog, Cardiff, and 40 acres, again with outline planning consent, at Parc Felindre in Swansea.
Having the development pipeline is one thing – being able to realise the potential from the same is another matter.
To this effect, it is encouraging to see improvements in the region’s infrastructure taking shape, including the electrification (extension) of the Cardiff to London Paddington section of the Great Western Mainline, together with KeolisAmey’s recent appointment as the region’s new rail franchise operator, tasked with delivering the South Wales Metro plans – both with the intention of helping to improve connectivity in the wider region and mobilise labour pools.
The eagerly anticipated decision on whether the Welsh Government will be pursuing with the M4 Relief Road around Newport (an announcement is hoped for before First Minister Carwyn Jones steps down in December, pending a review of the inspector’s report which followed the independent public inquiry into the matter) is key to the region’s infrastructure and will likely have a significant bearing on how tangible any rental / capital growth, certainly in the south-east Wales industrial market, will be.
Finally, the long-awaited abolition of the M4 toll charge on the Prince of Wales Bridge (December 17, 2018) should assist to improve journey times, increase labour movements and reduce the disparity in industrial land values currently exhibited between south-east Wales and the more mature Avonmouth market (a circa-£150,000-£175,000per-acre differential at present) – leading to create a wider “south Wales and south West” single regional industrial market as opposed to two distinct markets, as often perceived in the past.
With such apparent economic momentum afoot, together with south Wales’ industrial property demonstrating some of the UK’s fastest regional prime rental growth over the past year (over 13% from the preceding year), it would suggest that now is the time for investors and developers alike to take notice and re-focus their gaze back on the western banks of the Severn.