Cardiff is bucking the national UK trend, with the city recording above-average city centre offices take-up in the second quarter of the year, according to Bilfinger GVA’s latest Big Nine Report.
Despite the national figure showing a 3% fall below the five-year quarterly average, Cardiff, along with Bristol, Birmingham and Glasgow, experienced a strong second quarter this year.
Bilfinger GVA’s Big Nine Report highlights that office demand remains strong in Cardiff city centre, with the first half of 2016 maintaining the high level of take-up achieved in 2015, at a third above the five-year average.
The key deal in Q2 was within the public sector, with a government department taking 54,500 sq ft over four floors at the refurbished Brunel House. Bilfinger GVA represented the tenant in what is the largest deal of the year so far for the city.
Cardiff University took another significant deal of 29,000 sq ft at Friary House.
“The success of these deals leaves Cardiff with a shortage of good quality Grade B accommodation,” says Bilfinger GVA Director Tom Merrifield. “However, immediately available Grade A space in the city centre has increased to around 140,000 sq ft, from the very low level of the past two years. This equates to about a year’s supply of Grade A space, although there are strong expressions of interest across the majority of it.
“This is as a result of a number of completions including One Central Square and 2 Capital Quarter, as well as the Grade A refurbishment of 2 Kingsway. JR Smart has also started onsite with the construction of circa 75,000 sq ft at 3 Capital Quarter.”
There is also seven months’ supply of speculative space under construction. Headline rents have increased markedly over the past 18 months rising from £21.50 to north of £24psf, with rent frees falling from 21 to 12-15 months on a ten-year term. This equates to a net effective rent of £21.60.
Tom concludes, “The outlook remains positive for the city with a number of notable potential active requirements including Network Rail, PWC, Cardiff University and Lewis Silkin, coupled with the ongoing requirements for the new public sector Hub.”
Nationally, despite the market uncertainty fuelled by the referendum, overall take-up figures have held up well according to Bilfinger GVA. City centre total take-up amounted to 1.22 million sq ft (3% down as previously highlighted), whilst out of town take-up covered 0.79 million sq ft, 4% down on the five-year quarterly average. At £23.80, net effective headline rents increased by 4.9% over the year to Q2 2016. The Big Nine average headline rent rose 3.1% since Q2 2015 to £27.78, and the average rent free period dropped from 22 months this time last year to 20 months this time round.