The Cardiff office market has recorded its best ever third quarter on record, with take up levels reaching 183,992 sq ft, 83% above the long term average of 100,275 sq ft, according Savills.
Based on its own research into the Cardiff office property market, Savills also expects the full year office take-up in Cardiff to exceed 600,000 sq ft in 2016, 33% above the 10-year average.
The study found that take up reached 478,173 sq ft in the first nine months of the year, above the long-term average for this period of 355,962 sq ft, with demand primarily focussed on the city centre, which has so far accounted for 66% of total take up.
Savills notes that occupiers are moving back into the centre as new developments become available, including Motonovo Finance who took 71,000 sq ft at One Central Square, moving from Cardiff Business Park to benefit from a more central location.
Gary Carver, director in the business space team at Savills Cardiff, commented: “This year is set to be exceptional for office take up levels in Cardiff. The public sector has been the most active in the market, accounting for 31% of the take up as of the end of September. Large deals including the 54,600 sq ft letting of Brunel house to HMRC and the 29,000 sq ft letting of Friary House to Cardiff University are substantial examples of recent activity.”
The availability of office space within Cardiff has fallen from 1.5 million sq ft to 1.3 million sq ft as a consequence of the rise in office uptake, with Grade A availability now standing at 113,000 sq ft, which is only enough to cater for around one year of Grade A demand at current rates, according to Savills.
Consequently, a growing number of occupiers in the city centre are turning their attention to high quality refurbishments such as at St Patrick’s House, providing 51,000 sq ft of space. Pre-lets are also becoming more popular as a result of the shortage of stock.
Carver added: “Alongside the demand from traditional occupiers, Cardiff is also witnessing an increase in activity from companies in the creative and tech sectors. The new developments in the city centre and BBC Wales’ headquarters, due to complete in 2018, are fuelling this.
“Landlords have started to react to this trend by providing smaller suites, which are available on flexible terms, with communal areas for networking and co-working.
“The landlords of 101 St Mary Street have carried out a high quality refurbishment to provide a more contemporary office space with exposed services and brick work, more akin to the offices in areas such as Shoreditch in London, which has attracted clusters of companies in the creative and tech sectors.”
Office rents in Cardiff have reached £25 per sq ft in the city centre with Savills predicting top rents in the area rising to £26 per sq ft by the end of 2017 as new developments and high quality refurbishments come to the market.
The office investment market in Cardiff has also had a strong year, with volumes reaching £83m as of the end of Q3; 28% above the long term average for this stage in the year, fuelled n part by increased appetite from overseas investors who have accounted for £39m of total office investment to date.
Ross Griffin, investment director at Savills Cardiff, said: “Investment into Cardiff has remained above the long term average throughout the year. The fantastic start to the year has slowed slightly, however as UK institutional funds look to take advantage of asset management opportunities we expect to see more stock being brought to the market. These types of investors are interested in well let assets with strong covenants on long leases.”