Cardiff is expected to achieve its highest investment on record for offices this year despite a lack of prime stock limiting transactions.
Investment volume for the year stood at £61m at the end of the third quarter – on par with the five-year average, according to Knight Frank.
However, Legal & General’s backing of Rightacres’ £400m Central Square redevelopment, due to complete in the fourth quarter, is expected to push total investment in the city’s office market to its highest on record.
Active requirements at the end of the third quarter totalled 301,000 sq ft – 9% above the five-year average, according to Knight Frank.
However, grade A stock availability was only 107,000 sq ft – 31% below the five-year average of 156,000 sq ft.
Two large speculative office developments are due to complete in early 2016 – Rightacres’ 1 Central Square will deliver 135,000 sq ft and JR Smart’s 2 Capital Quarter will create 80,000 sq ft.
Matt Phillips, Knight Frank’s managing partner in Cardiff, said: “This is very good news for the city but it does mean that we are likely to have a shortage of new grade A accommodation until the next phases of development are undertaken.
“Therefore, there is a window for refurbishment opportunities over the next six to 12 months.”
The sale of Helmont House to Knight Frank Investment Management for £34.6m in June attracted fierce bidding from UK pension funds and opportunity funds as well as overseas investors.
The largest deal this year was at 2 Capital Quarter where Public Health Wales agreed terms on 51,652 sq ft.
Knight Frank predicts prime headline rents will increase from £22 per sq ft as at the end of the third quarter, to £23 by the end of the year and £24 by the end of next year.
Prime yields were at 5.75% and were forecast to remain below 6% in 2016.
