Tom Merrifield, Regional Head of Agency, Bilfinger GVA, Cardiff, reviews the market:
As widely anticipated, occupier demand and take-up of property across the Principality in 2015 is underpinning the widespread resurgence expected of the commercial property markets across South Wales. This resurgence is now matching levels not previously witnessed since 2007.
In the office market, significant deals included the letting of a number of floors at 6 Park Street comprising circa 40,000 sq ft, and the acquisition of three floors at Capital Tower by The AA. Both deals, transacted in Quarter One of 2015, demonstrate the level of demand for good quality Grade A and Grade B accommodation within Cardiff city centre has been strong – anticipated statistics are likely to show take-up over the year potentially topping 400,000 sq ft across the city centre and out-of-town markets.
As a result 2016 is offering encouraging signs for landlords and developers. This steady increase in demand, in particular supported by a number of larger active requirements, now supports the widely anticipated movement in rentals for both Grade A and Grade B stock with transactions likely to top £24.00 psf in Cardiff city for the first time. With a modest reduction in the incentives demanded by an ingoing tenant, the net figures a landlord receives should be significantly improved.
Likewise, the industrial market across South Wales, supported by Cardiff acting as the regional hub, continued to thrive during 2015 and offers the hope of an even stronger 2016 with a number of notable transactions across the region as the demand for manufacturing space further improves. The availability of high quality accommodation within Cardiff has proven to meet a continued demand – the letting of an 18,000 sq ft high quality facility at Neptune Point on Ocean Way at a strong headline rental of £4.95 psf showed an improvement in the general tone across the city.
Mirroring the anticipation for rentals within the office sector, throughout 2016 it is realistic to expect headline industrial and distribution rental for Cardiff to continue to strengthen off the back of a reduction in availability of quality space and the increased demand.
Across the board, headline rentals for the city stand to improve to the pre-recessionary and credit crunch levels of £5.50 – £6.00 psf. This level of improved rental is likely to be boosted not only by the dwindling availability of stock, but by the ongoing redevelopment of parts of the city leading to a potential surge in demand.