Good quality office space across South Wales’ major towns and cities is becoming scarce with more and more firms being forced to look at locations elsewhere.
In addition, a lack of speculative office space is making it harder for businesses to scale-up or set up shop across the region.
That’s the view of property experts at Bruton Knowles who are saying more development needs to be put in place so that firms looking to support some of the proposed major infrastructure projects can do so close to where the work is taking place.
Stephen James from Bruton Knowles said: “We’ve become increasingly concerned that the high number of office conversions in recent years has left SMEs struggling to find suitable accommodation to enable their businesses to grow and scale-up.
“The problem is being exacerbated because of the rise in student conversions which has pushed businesses out of the city centres.
“Office to resi conversion schemes in and around Cardiff in particular have eaten into the city’s supply of offices – and helped stoke rents in the surviving properties.
“Many SMEs are now finding it difficult to source cost effective office space in Cardiff city centre following the conversion of so much of the city’s office space to residential use.”
Stephen said shortage of new space coming on to the market, lack of speculative development and shortages of development land meant city centre office space would remain at a premium.
He added: “With limited new build coming on to the market this has sharpened demand across the board and provided further scope for rent increases. Prime new Grade ‘A’ space has recently risen to £25 per sq ft for example.
“It will mean businesses choosing to locate to other parts of the country and that is going to be bad news for commerce and for jobs. Even more worrying is a potential talent drain away from South Wales as home grown businesses find they have to relocate.
“Turning offices into residential may have been a good idea and a short term advantage for older space, but correct balance needs to be met as the demand for residential will always be linked to the availability of work nearby.”
Stephen said that if projects such as Newport’s M4 relief road get the green light then land around Llanwern and Chepstow would be the ideal locations for the office and light industrial space so desperately needed.
In addition, with the Severn Bridge tolls coming down is likely to result in businesses located in the West of England look across the water for a possible HQ.
Further West, if the Swansea Lagoon gets underway then land around would be the perfect location for support businesses and suppliers to set up.
Stephen concluded: “The lack of office space has seen office rents rising over the past 12 months and there are signs we are beginning to return to a Landlord-driven market. This is good news for landlords and investors, if less so for tenants. Without options in the city centres the only alternative is to look outside but it’s not easy to relocate if there’s nowhere to go.”