GUEST COLUMN:
Chris Sutton
Director
Sutton Consulting
Cardiff is a strong and vibrant capital city, being the political, commercial, administrative and cultural centre for the whole of Wales.
Since devolution the city has been a ‘jobs engine’ notably in financial and professional services alongside public sector and traditional city centre jobs.
However, the landscape has shifted dramatically in recent years, particularly in the wake of Covid-19. Post-pandemic changes to working practices have led to less footfall, impacting retailers, bars and restaurants.
Looking back, the period from 2011 was a golden era for Cardiff's office developers. That year saw Admiral's move to David Street, which marked the beginning of a construction boom that saw over more than 1.5 million square feet of office space built in central Cardiff.
This included landmark projects such as Central Square which now houses the BBC Wales headquarters and the UK Government hub and Capital Quarter, south of the railway mainline. The skyline was dotted with cranes, thanks to the efforts of dominant local developers Rightacres and JR Smart, who significantly contributed to the city's vibrant office market pipeline.
The long-term average take-up has been around 500,000 sq ft per annum, but this dipped post-Covid. The good news is that, in Q1 2024, take-up was back to 113,000 sq ft, according to agents Avison Young. This marks a return to somewhere near long-term trend, although many occupiers are reassessing their floorplate requirements. Many occupiers are seeking to reduce their overall size requirement but moving up the quality threshold to Grade A accommodation with internal collaboration space.
Even before the pandemic, technology was reshaping the nature of office demand. Tools like Zoom and Microsoft Teams have accelerated these trends, facilitating remote work and reducing the necessity for traditional office space. The Welsh Government's target of ‘30% remote working’, introduced just prior to Covid-19, has further compounded this shift towards hybrid working models. The post-Covid era has seen businesses re-evaluating their office space needs, with many opting for more flexible, hybrid work arrangements.
As we emerge from the pandemic and its aftermath, the central Cardiff office market is just starting to show signs of recovery. The market is still below its long-term average however the changing nature of office demand is creating churn and a shift to modern, fit for purpose floorspace.
The stock of existing Grade A office space in Cardiff is being absorbed, but there is a looming challenge. Today's businesses are increasingly disinterested in older, 1970s-style office blocks, such as those found on Newport Road. There is a clear preference for modern, adaptable workspaces that cater to the evolving demands of the contemporary workforce and a clear shift to the central business district now established around Cardiff Central railway station. The roll-out of the South Wales Metro has improved this hub & spoke mass transit system which supports the city centre.
The future of Cardiff's commercial office market hinges on its ability to adapt to these changing dynamics. The era of large-scale, speculative office developments may be on hold until rents increase to improve viability, but there is still a need for high-quality, flexible office spaces, increasingly including incubation space. Developers and landlords must focus on refurbishing and modernising existing properties to meet current sustainability standards and expectations.
Cardiff retains strong fundamentals with three universities creating a skills base on a par with competitor UK cities. Cardiff’s status as the economic engine of Wales needs to be nurtured. A competitive business environment needs skills, capital and infrastructure as well as a sites and premises offer. Technology, including AI, will impact future trends but there are growth sectors firmly established now including fintech, AI, life sciences, gaming, cyber and creative.
While the Cardiff commercial office market faces challenges, there are also significant opportunities for growth and adaptation. By embracing flexibility and modernisation, Cardiff can continue to thrive as a leading business hub in the post-Covid world. The market's recovery may be gradual, but with strategic investments and a forward-looking approach, Cardiff is well-positioned to meet the demands of the future.
