Fillips and failures: Demand for office space is in a state of flux, with declines in some markets and stability in others. Stacey Meadwell reports
It is a mixed picture for the South Wales office market. The 68,000 sq ft Centrica deal at 4 Callaghan Square, Cardiff, will no doubt present a welcome fillip to annual take-up figures, but demand for space remains patchy.
Gary Carver, associate director at DTZ, says: “Enquiry levels do appear to be declining slightly, certainly from occupiers seeking offices of less than 3,000 sq ft. However, good quality stock is still attracting a reasonable amount of interest.”
According to Lambert Smith Hampton, demand for freehold offices continues to hold up, and according to Peter Loosmore, who is based in LSH’s Swansea office, in certain locations it is outstripping supply.
Cardiff has a number of office buildings under construction, which could pose a risk of oversupply in the short term if occupier demand declines.
As retail development programmes continue, retailers remain reluctant to commit to higher rents in South Wales’ key centres. Stephen Jones, head of retail at King Sturge in Cardiff, says prime rents in Newport, Cardiff and Swansea have remained static for the past 12 months.
Schemes in the pipeline include St David’s 2 in Cardiff, which is due to open next autumn, and The Friars in Newport, which is slated to open in 2010. However, Jones reports that there is continuing strong demand for prime city-centre units.
The shed market is suffering as a result of the weaker economy. Although figures for this year are unavailable, Jason Thorne, director of industrial for South Wales at LSH, says: “Deals are still being completed. However, from April/May, we have seen larger transactions withdrawing at solicitors stage, and smaller ones are now going the same way.”
He predicts that take-up for 2008 will “no doubt be much lower” than in 2007.
Market at a glance
Cardiff
Zone A prime retail rents have remained static at £325 per sq ft
Headline industrial rents remain static at £6 per sq ft
Office take-up for the first half of the year was circa 210,000 sq ft – less than half that acheived in 2007
Between 2008 and 2010, expected office completions should average slightly above 190,000 sq ft pa, which is nearly twice the average annual take-up of 102,000 sq ft
This year, office rental growth of 2.9% is expected, dropping to 1.9% in 09
Swansea
Zone A prime retail rents have remained static at £160 per sq ft
Office availability is 254,800 sq ft, which is 7% of total availability
Two buildings totalling 82,700 sq ft are under offer
Prime office rents are £14.50 sq ft
Headline industrial rents have risen from £4.25 per sq ft to £4.50 per sq ft this year
Newport
Zone A prime retail rents have remained static at £140 per sq ft
Office availability is 277,820 sq ft, which equates to 13% of the total stock last month
The Home Office is looking for 35,000 sq ft of offices in the city
Prime office rents stand at £14.50 per sq ft
Headline industrial rents remain static at £4.50 per sq ft
