A diversity of occupier type, demand for small suites, and a lack of Grade A space were the overriding themes of the Cardiff office market in 2018, according to Savills.
Total take up in the Cardiff office market reached 499,215 sq ft (46,378 sq m), as appetite for smaller suites continued to rule demand in the city, with 70 deals below 3,000 sq ft (278 sq m). There were a total of 107 deals in 2018 compared to 104 in 2017 – with the average deal size being 4,665 sq ft (433 sq m) compared to 6,769 sq ft (628 sq m) in 2017. The high demand for smaller floorplates is expected to continue into 2019.
The diversity of occupiers taking space in Cardiff is highlighted by deals such as the acquisition and occupation of the 85,000 sq ft (7,896 sq m) former Tesco House building in Heath by Cardiff and Vale University Health Board; Admiral Insurance signing for 65,000 sq ft (6,038 sq m) at No 3 Capital Quarter; Geldards solicitors taking 30,000 sq ft (2,787 sq m) at 4 Capital Quarter and Keolis Amey taking 20,000 sq ft (1,858 sq m) at St Patrick’s House.
Along with a number of the major cities in the UK, Cardiff has witnessed an increase in take up from serviced office providers with around 28,000 sq ft (2,601 sq m) of new space brought to the market last year according to Savills. BizSpace acquired Trafalgar House and has converted 16,000 sq ft (1,486 sq m) of the 54,000 sq ft (5,016 sq m) total into serviced office space. Chadwick Business Centres have bought 12,000 sq ft (1,114 sq m) of serviced office space to the market at W2, Wellington House.
Looking ahead to 2019, Cardiff will face a lack of Grade A and good quality second hand stock says Savills. As a result there may be several pre-lets that happen in the coming year. The mounting pressure on the lack of available office space should push developers to start speculatively building in the city, particularly at John Street and The Interchange, Central Square.
Furthermore, Cardiff should see continued rental growth in refurbished, second-hand (Grade B) offices in 2019 with rents growing by around 30% in some properties in 2018. This could see rents on Grade B stock potentially hit £20 per sq ft (£215.28 per sq m) in 2019. By comparison, Grade A rents are currently at £25 per sq ft (£269) although for any pre-let in 2019 this is expected to be bettered.
Gary Carver, director in the business space team at Savills Cardiff, comments:
“Last year was very much a continuation of 2017, with smaller requirements driving demand. The city’s appeal has increased significantly over the last few years with new developments such as Capital Quarter and the refurbished 2 Kingsway helping boost its profile and popularity.
“Over the coming 12 months we expect a continued level of demand from a widening circle of occupiers as those companies who had previously ruled out Cardiff start to turn their attention to the city. As well as Grade A, the city needs a good range of space to suit all sectors. There is a continuing trend for less traditional office space in buildings which offer exposed services and concrete, with fit outs providing more collaborative space and the incorporation of biophilic office design elements.”