Cardiff office prime rents to reach new record level in 2024 says Knight Frank

Hodge House, Cardiff

The prime rent for Grade A office space in Cardiff is set to reach record levels later this year, according to property consultancy Knight Frank.

Its annual UK Cities report forecasts increases from the £25.00 per sq ft level in 2023.

Matt Phillips, head of Knight Frank’s Cardiff office said: “There are deals currently under offer on existing buildings that will increase the prime rent in the first half of the year and we expect prime rents for some new buildings will reach £30.00 per sq ft by year-end.

“Occupiers are seeking well-located offices with strong ESG ratings and amenities to support post-pandemic workplace strategies, and landlords that can deliver this will reap the benefits of increased rental income as a result.”

The Knight Frank report reveals that Cardiff office take up in 2023 was down 16 per cent on the previous year at 277,222 sq ft. Notably though, the 89 occupier transactions that took place was in line with the five-year annual average.

The most active occupier group during the year was the TMT sector, where one fifth of all transactions took place. The largest leasing transaction of the year was the 19,243 sq ft letting to technology firm Veezu at Hodge House in central Cardiff. The business relocated its head office from Newport to Hodge House, which recently underwent a £17m refurbishment to transform the 110,000 sq ft office building.

Grade A availability had reached 414,033 sq ft by the end of 2023, the highest number on record for Cardiff. This represented a 51 per cent increase over 12 months and was 59 per cent above the five-year average.

Matt Phillips said: “The increase is in part due to refurbishment completions along with grey space coming to the market on behalf of existing occupiers with longer lease commitments. Looking ahead, the development pipeline comprises 107,010 sq ft, all of which is speculative. This scheme at 1 John Street, Callaghan Square, is due to complete in 2025.

He added: “Even with the backdrop of macro uncertainty and local ‘issues’, the UK office market is active, although market polarisation is widening. While high-quality space with good amenities will attract occupiers, unrefurbished offices will struggle or be repurposed for alternative uses if outside primary search areas.

“Most leasing activity is currently taking place in the TMT, professional services, and construction & engineering sectors, and this is expected to continue in 2024.

“Cardiff remains under-supplied in the flex market and we expect to see new operators in the next 12 months. As businesses crystalise their approach and future workplace needs, the demand for Cat A+ and fitted solutions is beginning to increase.”

Meanwhile, in the investment market office investment in Cardiff reached £41.4m in 2023, 41 per cent below the 5-year annual average but up 58 per cent from 2022. The largest deal to complete in 2023 was the sale of Airbus Office Campus for £26m to AW Properties.

Property companies accounted for 83 per cent of investment turnover in Cardiff during 2023.