Cardiff office market sees strong growth in letting deals and its headline rent level
Cardiff’s commercial office property sector has performed strongly this year with rising letting activity and its headline rent on an upwards trajectory after being stagnant for nearly a decade, shows new research from property consultancy Knight Frank.
The firm’s Cardiff Report said the market has benefited for an increasing number of companies expecting employees to spend more time in the office,
Its annual report also shows that those seeking office space are becoming more selective, with high-quality, amenity-rich office spaces that support health, well-being, and sustainability objectives foremost in demand.
Matt Phillips, head of the Cardiff office of Knight Frank, said: “This occupational realignment is having a profound impact on the property landscape in Cardiff. While there is a plentiful supply of commercial spaces in Cardiff, there is a notable shortage of properties that meet this evolving criteria of active occupiers.
“The market is polarising at pace, with new or recently refurbished buildings generating healthy occupier attention. Older buildings lacking significant capital improvements, however, are experiencing greater challenges. Herein lies both the challenge and opportunity for Cardiff.”
Knight Frank’s said total office take-up in the city for the third quarter of this year topped 146,000 sq ft - the highest quarterly total since Q4 of 2020. For the year to date a total of 334,500 sq ft has been let - 56% ahead of the equivalent period in 2023 and the strongest first nine months to a year since 2017.
So far this year three deals of more than 20,000 sq ft have been completed, the highest for three years, Notably, the average deal size for the year-to-date is 4,711 sq ft, the highest since 2020.
The largest deal this year was the Welsh Government acquiring a 51,400 sq ft former Lloyds office building at Cardiff Gate Business Park to support the expansion of the compound semiconductor cluster in South Wales.
The other two deals over 20,000 sq ft saw professional advisory firm, PwC taking 33,200 sq ft at One Central Square and Aldemore Bank (via Motonovo Finance)taking 28,100 sq ft at the adjacent Two Central Square.
Motonovo has taken space being sublet by law firm Hugh James in the building. Motonovo is moving out of One Central Square, which provides the space for PwC.
Mr Phillips said: “So far this year companies originating from the financial services and insurance sectors have been particularly active, accounting for 27% of the total office space take-up. Notably, four out of eight of leasing deals involving spaces over 10,000 sq ft were secured by firms from these sectors.”
At the end of third quarter the overall vacancy rate in the core Cardiff city and Bay market was 9.9%, a slight fall compared to the peak of 11% earlier in the year. Inclusive of out-of-town areas, vacancy rates were 11.1 per cent in Q3.
Mr Phillips said: “This elevated vacancy rate masks the complete picture. Grade A availability has steadily declined during the year to reach 324,000 sq ft at the end of the third quarter and this meant that the vacancy rate for new and grade A spaces dipped to 3.8%, meaning the gap between total availability and that of ‘best quality’ is now the widest for 10 years.”
The report shows that the city’s development pipeline remains limited for those targeting new space. At the end of the quarter, John Street was the only new speculative office development under construction in Cardiff city centre. Being developed by JR Smart, the building is due for delivery by the end of 2025 and will provide 107,000 sq ft of office accommodation with floor plates of 13,000 sq ft.
While rents increased in Cardiff during 2024 the gap compared to other regional markets also increased, the research reports. The headline (prime) rent in Cardiff increased to £28 per sq ft, The level was achieved through the letting deal at One Central Square with PwC. The previous headline rent was £25 per sq ft.
The average market asking rents also experienced growth, rising to £18.50 per sq ft from £17.50 in 2023. Knight Frank said the upward trend in prime and average rents reflects Cardiff’s competitive market for better-quality spaces.
However, despite this uplift, the disparity between Cardiff’s prime rents and those in other UK regional core cities expanded significantly. At the end of Q3 the average headline rent across core cities outside of London stood at £38.00 per sq ft, with the highest rent reaching £48.00 per sq ft in Bristol.
