Cardiff office market: Slow start to the year, but sentiment and activity improving

Chris Terry, associate at Avison Young in Cardiff

The out-of-town office market has dominated Q1 activity in Cardiff, according to the latest quarterly Big Nine analysis from strategic real estate adviser Avison Young.

The two largest deals of the quarter were out-of-town, led by 13,168 sq ft to the Department for Work and Pensions at Ty Bevan Llanishen, one of five transactions to government departments across the Big Nine cities this quarter, helping give the public sector its strongest level of take-up in 12 months. In total, the Cardiff out-of-town market saw 25,534 sq ft of take-up.

The second largest deal was also out-of-town, 5,780 sq ft to Shaw Health Care at St Mellons Business Park.

Chris Terry, associate at Avison Young in Cardiff says,

“As a result of the pandemic, occupiers continue to downsize their requirements and a handful have returned grey space to the market including 41,000 sq ft by British Gas, 38,500 sq ft by Hugh James Solicitors, and 31,000 sq ft by First Source call centre.

“As such, Grade A supply in the city centre has increased to 373,000 sq ft, in addition 109,000 sq ft of new space will become available next year, with the completion of the John Street development. We also expect Rightacres to start on site in the summer with the 60,000 sq ft Brewhouse at Central Quay, the former Brains brewery site.

“A total of 227,000 sq ft is currently under construction in the city, with 53% pre-let.”

He continues, “A combination of lockdown and the traditionally slow start to the year has not surprisingly resulted in well-below average take up activity for the Big Nine office markets during Q1. However, sentiment is improving noticeably, enquiries are increasing, and there is enough activity in both the occupier and investment markets to indicate that as restrictions continue to ease, activity will increase throughout the year.”

Total take-up during Q1 across the Big Nine cities amounted to 783,420 sq ft in the city centres, and 676,126 sq ft out-of-town, 41% and 14% below the respective ten-year averages.

Chris concludes, “Covid has accelerated the appeal to occupiers for a wider range of flexible lease arrangements, whether that is short term leases, regears, or management agreements, with Cat A+ fit-out or ‘plug and play’ increasingly popular. With grey space coming back into the market, as we see in Cardiff, occupiers are also picking up ready to go space more easily, where they do not have to commit to the upfront capital cost of fit-out.

“As occupiers look for solutions to bridge the divide between indefinite working from home, and a total return to the office, the hybrid working model, a combination of home, the office and local flexible working, is gaining significant traction, and having an effect on location decisions.”

Headline rents in Cardiff city centre stand at £25 psf, with out-of-town £15.50 psf.