Cardiff office market upturn in first half of 2024 says Knight Frank

Cardiff office market demand picked up in the first half of the year according to new research from global property consultancy Knight Frank.

According to its national review, in H1 – January to June 2024 – take-up in Cardiff’s city centre reached 188,112 sq ft, 27 per cent above the equivalent period in 2023 and four per cent above the 10-year H1 average.

The largest deal to complete in H1 involved the Welsh Government, which purchased over 50,000 sq ft of space at Centre 7, Cardiff Gate Business Park to support the expansion of the compound semiconductor cluster in South Wales.

Matt Philips, head of the Cardiff office of Knight Frank, commented: “Partly as a result of this large deal, the public sector was the most active occupier group, accounting for 28 per cent of space leased in the H1 period. However, Cardiff benefits from a diverse occupier pool, with total take-up comprised of 13 different occupier sectors.

“The prime office rent remained stable at £25.00 per sq ft but we expect this to increase to £30 per sq ft by the end of the year.”

On the supply side, Grade A availability stood at 391,647 sq ft at the mid-year point, reflecting an increase of 38 per cent compared to the equivalent period in 2023 and 34 per cent above the five-year average. Total market vacancy rose marginally to 12.5 per cent, from 12.3 per cent the previous year.

Matt Phillips said: “Although supply rose year-on-year the development pipeline in Cardiff is limited, with just one scheme under construction. John Street will deliver 113,360 sq ft of speculative space and is due to reach practical completion in 2025.”

Office investment activity in Cardiff was modest in H1 2024, with volumes totalling £13.9m, 59 per cent below the equivalent period in 2023. Prime office yields softened by 100 bps to 7.50 per cent over the past 12 months, reflecting an outward movement of 225 bps since the onset of the pandemic in 2020.

Looking ahead, Matt Phillips forecast: “For landlords, two contrasting scenarios are unfolding. Older buildings lacking significant capital improvements are facing tenant departures, and landlords must choose between investing to align buildings to current market standards or exploring repurposing for different uses.

“In contrast, new or recently refurbished buildings in well-located areas are generating healthy leasing activity. Demand for the ‘best’ buildings is growing, with organisations keen on well-located and amenitised buildings that also support environmental, social, and corporate governance (ESG) aspirations.

“Undoubtedly, caution will underscore every business decision in the latter half of this year. However, the rapidly evolving business and real estate landscape increasingly means that delay is no longer an option.”