The Cardiff commercial office market saw a significant drop in transactions in 2020 as a result of the Covid-19 pandemic, however, the year ended on a strong note, boosted by one of the largest pre-lets of the year across all of the Big Nine office markets.
Strategic real estate advisor Avison Young has released its latest quarterly Big Nine office market update, covering Q4 2020. The Legal & General 121,256 sq ft pre-let at Interchange development at Central Square in Q4, brought total take-up for the year in Cardiff to 305,000 sq ft. This is 39% below the ten-year average; the number of transactions dropped to 60, compared to an average of 110 over the previous five years.
Take-up across the Big Nine markets was severely impacted by the pandemic, with total take-up amounting to 5.6 million sq ft during 2020, the lowest annual figure since the Global Financial Crisis and 33% down on the ten-year average.
Elsewhere in Cardiff during Q4, there were three deals more than 5,000 sq ft including Hamlyn Williams taking 6,461 sq ft at 101 Mary Street and Careers Wales taking 6,694 sq ft at Churchill House.
Chris Terry of the Commercial Agency team at Avison Young Cardiff, says, “There continue to be significant requirements in the market, with government occupiers looking to consolidate their footprint in the city and a number of professional service businesses actively looking for space.
“There are also large companies such as PwC, HSBC and Arup with lease events in 2022, that are currently looking at various options.”
He continues, “However, we do not expect to see many new entrants during 2021 and there is already evidence of several occupiers downsizing their requirements. Furthermore, while there is relatively little evidence so far, we are already seeing a handful of occupiers putting ‘grey’ space onto the market and we expect this trend to continue.”
Whilst Cardiff has seen a significant amount of development over the last few years, there is currently a lack of readily available grade A office supply. However, this is likely to change in the short-term with the completion of 109,000 sq ft John Street development. In addition, work is expected to work start on the 220,000 sq ft Ledger Building as part of the mixed-use Central Quay development.
Chris adds, “During an unprecedented time of uncertainty for the office market, there were some encouraging signs of activity towards the end of the year across the Big Nine cities with a number of significant pre-letting deals such as in Cardiff.
“Headline rental levels have largely sustained throughout the pandemic and in some cases increased as landlords have held firm, although there is some evidence that rent-free periods have moved out slightly.”