Neil Francis, Associate Director at DTZ in Cardiff gives his thoughts on how the industrial market performed in South Wales: “The industrial sector has witnessed a good level of take-up this year, with some significant large deals, as well as a welcome change in landlord’s attitudes and aspirations.
The M4 motorway has continued to be the focus for this take-up activity, with many occupiers still seeking accommodation in well located areas. This was certainly evident in many of the larger deals secured this year.
These larger transactions have assisted in ensuring take-up figures should exceed well over three million sq ft by the end of the year, but perhaps the most significant deal close to the M4 occurred in the middle of the year when Renishaw acquired the 460,000 sq ft former Bosch facility at J34.
As positive as these take-up figures appear, they are somewhat inflated due to a number of short-term lettings of warehouse space. The impact of empty rates liability continues to be a heavy burden for owners throughout South Wales. With many seeking ways to mitigate their ongoing costs, this year has seen more of a willingness to let space at low rents or even on a rates only deal.
The impact of empty rates has also resulted in a change in owners’ attitude towards upgrading their buildings in order to generate interest. With much of the market’s vacant second hand stock in need of refurbishment, it has been those landlords willing to spend money that have prospered. By undertaking refurbishment works, and improving the quality of their buildings, they have successfully attracted occupiers that, in previous years, would have taken newly constructed space. This has been evident at Portmanmoor Road Industrial Estate in Cardiff, where two 25,000 sq ft units, empty and vandalised over a five year period, were refurbished to a high standard with one let on long-term lease to Bay Productions and the other under offer to a national occupier.
Indications are that this trend will continue in 2012 and although it will remain difficult, there are enough active requirements within the market to allow us all to remain optimistic.”
Alex Easton, Associate Director, office agency gives his thoughts on the offices market in South Wales:
“Despite poor market sentiment amongst developers and landlords alike, Cardiff take-up (both in and out of town) surpassed many expectations in Q3 with close to 50 deals being concluded totalling in excess of 165,000 sq ft.
Year end take-up is likely to reach close to 450 – 475,000 sq ft, more in keeping with pre-credit crunch levels and disregards Admiral’s 195,000 sq ft pre-let in Q2, which will ‘spike’ take-up to a new, record level.
City centre grade A availability now stands at sub 50,000 sq ft and includes the last remaining 7,300 sq ft at Callaghan Square which, at current take up levels, represents less than a single year’s supply.
Due to patchy enquiries, static prime rents and continuing funding difficulties, there are no planned ‘prime’ speculative developments in the pipeline and the lack of new space is therefore unlikely to be addressed in the near future.
Choice is limited, to say the least, for the likes of Legal & General, Hugh James and Morgan Cole, all of whom have live sizeable enquiries going forward. With lease events some way off however, all will have the opportunity to consider new build or re-development opportunities on a pre-let basis at MEPC’s Callaghan Square, and a further phase at Fusion Point by Robert Hitchins.
Although 2011 is likely to finish on a positive note in terms of take-up, it will be interesting to see how the market fares in 2012 and into 2013. All the signs would indicate that there will be pressure on prime headline rents to rise and that incentives will be reigned in from their present level of between two and three months’ rent free per year term certain.”