Comment: Mark Sutton, Knight Frank and Ben Bolton, Cooke and Arkwright: Decline of speculative office development in Cardiff4th May 2012

Against the current economic backdrop, speculative office development in the Welsh capital has declined. Here property agents Mark Sutton of Knight Frank and Ben Bolton of Cooke & Arkwright look at the options out there for companies looking to move.

It’s no surprise that the financial meltdown, which has swept across the world since 2008 has had an effect on the confidence of developers. Speculative office development at the higher end of the market has more or less stalled with only a niche scheme of 10,000 sq ft at 18/19 Park Place to come to the market during 2012. JR Smart’s 80,000 sq ft development of Number 1 Capital Quarter is the only scheme currently on site and will not add to the availability until its completion in 2014. However, despite the doom and gloom out there, many companies are now growing and looking to make a statement by relocating to prime office space. 

There’s now a real squeeze on grade A office stock across central Cardiff and ambitious firms are getting in there early to make the most of available opportunities.

Despite current leases running to 2014, solicitors Hugh James and Morgan Cole are seeking 80,000 sq ft and 30,000 sq ft respectively. KPMG exercised a similar right by moving to 3 Assembly Square at Cardiff Waterside a year before their agreement at Fitzalan Court had expired.

Cardiff’s total availability currently stands at a reduced 1.3m sq ft, of which approximately 10% is grade A space, the majority of which is located in Cardiff Bay. With consistent demand and a lack of grade A space in the city, future deals could be accelerated.

It’s agreed among agents that Cardiff Waterside and Callaghan Square are the two prime developments currently in Cardiff. Availability of space at Callaghan Square is running low, with just 7,333 sq ft at No 3, 2,481 sq ft at No 5 and 7,700 sq ft at No1.

Berry Smith look like renewing on their home at Hayward House having previously courted the market for a 10,000 sq ft relocation.
3 Assembly Square at Cardiff Waterside has recently attracted the city’s record rent, with patent attorneys Abel & Imray paying £22 psf for a glass fronted office looking across the water at the new BBC Roath Lock studio.

The ground, 1st and 2nd floors are available in 3 Assembly Square, which alongside Abel & Imray is the home to KPMG, Acuity Legal and Gambit Corporate Finance.

There was a good level of activity in the office market last year, with 640,000 sq ft of take up, the highest in the past ten years. However, figures were largely driven by Admiral’s new 195,000 sq ft headquarters, which was the biggest pre-let ever seen in the city.

So far 2012 has seen 86,000 sq ft of office take up in the first quarter, and assuming a consistency of take-up levels for the rest of the year and the expected trend of grade A stock outperforming secondary stock, it is inevitable that the prime space of the city will become increasingly sought after.
The knock-on effect of dwindling grade A stock could mean occupiers starting to see less generous incentives on the table. We’ve already seen headline rents reach a new high at 3 Assembly Square, and we expect net effective rents to begin to rise by the end of the year. This again points to well advised companies making the move sooner rather than later.

• Mark Sutton is a keen cricketer and will be looking to improve his Personal Best in the Property Triathlon at Dorney Lake in May.
• Ben Bolton is  a keen sportsman and cyclist. He is the current Welsh Masters Downhill Mountain bike champion and ranked 6th master in the UK for 2011.