Cardiff office market ‘polarising at pace’, says Knight Frank

Office take-up in Cardiff is at its highest level since well before the Covid-19 pandemic, with rents rising for the first time since 2016. Leasing in the third quarter topped 146,000 sq ft, according to Knight Frank, the highest quarterly total since the last three months of 2020. That took the year-to-date total to 334,500 sq ft, which is 56% ahead year-on-year and the best first nine months of a year since 2017. Matt Phillips, head of the Cardiff office of Knight Frank, said occupiers are prioritising buildings that support their teams’ wellbeing and sustainability goals. “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,” he added. “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 the opportunity for Cardiff.” Three deals over 20,000 sq ft have been signed this year, with the average deal size of 4,711 sq ft the highest since 2020. The largest deal so far this year has been the Welsh government acquiring the 51,400 sq ft Centre 7 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 were PwC taking 33,200 sq ft at One Central Square (pictured) and Aldermore Bank taking 28,100 sq ft at Two Central Square. The city’s development pipeline remains limited. As of the end of the third quarter, developer JR Smart’s John Street was the only new speculative office scheme under construction in the city centre. The 107,000 sq ft building is due for delivery by the end of 2025. Prime office rents have risen to £28 per sq ft, the first increase since 2016. That compares with an average prime rent across other significant regional cities of £38 per sq ft, with the highest rents reaching £48 per sq ft. “The gap between Cardiff and these other cities is the widest recorded in Knight Frank’s data,” said Phillips, “albeit given the falling availability of best-quality space, competition will apply extra upward pressure on rents at this end of the market.” View more office deals in Cardiff >> Photo: One Central Square, Cardiff, from Knight Frank/HPR Marketing