Take up in the Cardiff office market for the full year in 2016 is expected to reach circa 670,000 sq ft (62,245 sq m), the highest level for 15 years, according to international real estate advisor Savills. This figure surpasses the 615,000 sq ft (57,135 sq m) transacted in 2015 and is 34% above the ten year average of 500,000 sq ft (46,451 sq m) for the city.
The firm notes that the high level of take up was driven by an above average number of large deals and pre-lets. The professional and legal services led the occupier mix accounting for high profile deals including: Hugh James 100,000 sq ft (9,290 sq m) pre-letting at 2 Central Square; Motonovo Finance taking 71,000 sq ft (6,596 sq m) at 1 Central Square and HMRC taking 54,000 sq ft (5,016 sq m) at Brunel House.
Demand for Grade A space pushed rents up in 2016, with average headline rents rising by 14% over the year from £22 to £25 per sq ft (£236 to £269 per sq m) according to Savills. It is anticipated that Grade A rents will remain at £25 per sq ft in 2017.
Gary Carver, director in the business space team at Savills Cardiff, comments: “Take up of office space in Cardiff reached exceptional levels in 2016. The city benefitted from many high profile deals throughout the year and the emergence of the city as a TMT hub. Looking ahead to 2017, One Canal Parade and 3 Capital Quarter are due to complete in 2017, reducing the demand pressure on Grade A space. The proposed 270,000 sq ft pre-let to HMRC in Central Square and two deals over 30,000 sq ft which are expected to complete in January, will ensure take up levels in 2017 remain at the same high levels we saw in 2016.”
Savills predicts investment into Cardiff offices will reach circa £150 million for 2016, against £136 million in 2015, with overseas buyers taking particular interest in larger lot sizes such as 1 Capital Quarter acquired by Golden Gate Capital and the BT Data Centre acquired by Keppell. Despite a slower second half of the year, property companies and private investors remained active, but were careful in stock selection. The sale of The Levels on Capital Business Park, Cardiff, is an example of this. The high quality multi-let industrial estate provided both asset management opportunities as well as an attractive running yield for the foreign buyer.
Ross Griffin, director in the investment team at Savills Cardiff, comments: “The Cardiff investment market had a robust year in 2016 with the city being of interest to a broad cross sector of investors. Sentiment for the year ahead remains positive and there is a perception of greater value to be sought outside of London and the South East.”