UK Cross Sector – Spring 2019
SPOTLIGHT Cardiff: Savills Research Connecting the City
Maintaining growth Developing the city centre Unlocking regional potential Overview
Photo © Meshroom Punching above its weight Cardiff is on the verge of a sustained period of growth, but connectivity will be key to unlocking the full potential of the capital region
Cardiff is half the size of the next largest growth of 6.1% in 2018, well above the A growing city of the nine UK Core Cities, Liverpool, England and Wales average of 1.9%. Cardiff is projected to see population but it punches well above its weight. As Despite this strong price growth, growth of 25% by 2034, a rate of growth the primary economic hub for South housing remains relatively affordable that exceeds all the other UK Core Wales, the influence of the city reaches in Cardiff, with an average house price Cities and is even higher than London. well beyond its boundaries. to average earnings ratio of 6.58. This According to Oxford Economics, Nearly 77,900 people, a third of the is in stark contrast to Bristol, which employment is forecast to grow by 12% workforce, commute into the city each despite having similar average annual by 2030, bringing 27,600 new jobs to day which demonstrates the important earnings of £27,000, has a house price the city, and outpacing the UK growth economic and social role Cardiff plays to earnings ratio of 8.99. Cardiff is forecast of 8%. in relation to the wider region. It is the therefore well placed to attract those The strongest forecast growth is sixth biggest retail centre in the UK, and becoming priced out of areas on the expected to be in the professional, attracts over 20 million visitors a year, other side of the River Severn. scientific and tech sector, which is bringing £1 billion to the local economy. Office space is similarly affordable, expected to grow 60% by 2030. There and attractive in comparison to Bristol. is also strong growth forecast for the Strengthening markets Grade A office rents in Cardiff are at administration and information sectors, The real estate market has remained £25 per sq. ft., with the potential to rise which are anticipated to grow by 56% resilient despite the current political to £27 per sq. ft. for new supply. and 46% respectively. uncertainty. House prices are now 21% In contrast, top rents in Bristol This projected growth is attracting above their pre 2008 peak, in line with are reaching £35 per sq. ft., and investment. During 2018 Cardiff saw Birmingham and ahead of Manchester affordability is becoming a constraint total commercial investment volumes and Leeds. Cardiff saw house price on further growth. of £408 million, 34% above the
2 Overview
Figure 1 New homes delivery as a percentage of existing stock has fallen Cardiff in Cardiff and is lagging behind the rate of growth in other cities All You Need
To Know ■ Number of dwellings % Growth 152,000 1.8% Net Additional Dwellings as % of Stock
1.6% 2006-07 2015-16 150,000
1.4% Cambridge 1.5% 1.7%
148,000 1.2% Reading UA 0.9% 1.1%
146,000 1.0% Manchester 2.4% 0.8% £1.2 billion 0.8% Bristol 1.3% 0.79% Investment in the 144,000 Cardiff Capital Region 0.6% Edinburgh 0.8% 0.7% Number of dwellings 142,000 housing stock % change to 0.4% Leeds 0.8% 0.7%
140,000 0.2% Birmingham 0.9% 0.7%
138,000 0.0% Oxford 1.3% 0.7%
Cardiff 1.6% 0.4% 2011-12 2010-11 Source StatsWales, MHCLG 2012-13 2016-17 2015-16 2014-15 2013-14 2009-10 2007-08 6.1% 2008-09 Annual house Source StatsWales, MHCLG price growth 5-year annual average. 84% and aims to boost economic ago, total housing stock was of investment was in office growth throughout the region. growing at a rate of 1.5%. Now, space, and 32% of investment Investment of £1.2 billion has the growth rate is considerably came from overseas. been committed by local and slower. Over the past five years The influence of the city national government, with over the rate of growth has averaged is also growing as it becomes £700 million of investment to 0.3%, lagging behind the other increasingly well connected. fund the Metro network for UK Core Cities. There are currently 1.6 million South East Wales. Office space is also in short people living within a 45 supply, both as a consequence Challenges ahead 25% minute commute of Cardiff. of limited Grade A development Projected Connectivity will be boosted However, there are key and the removal of secondary population growth by the electrification of the Great challenges which need to be stock via office to student to 2034 Western main line, cutting travel addressed if Cardiff is to reach its accommodation conversion. time to London to 105 minutes. full potential. The city has been The city doesn’t currently have The recent removal of tolls failing to provide enough housing enough available Grade A office on the bridges crossing the or commercial space to meet supply to meet the demand for Severn is anticipated to boost demand, and if this situation even one years’ worth of take-up. travel between South Wales continues, the shortage of supply However, there is significant and South West England and could lead to rising prices, potential in the city centre and bring a £1 billion boost to the threatening the affordability bay area for commercial led Welsh economy. which is currently such a regeneration. Delivering this The importance of linking strength for the city. development and linking new 27,600 Cardiff to the wider Welsh There has been a consistent housing to existing employment New jobs economy has been recognised shortfall in housing delivery centres will be critical for the by 2030 in the Cardiff Capital Region for the past five years. Delivery future economic success of city deal, established in 2016. has averaged 490 homes per Cardiff and the wider South The deal covers 10 local year, well short of the Local Plan East Wales region. authorities in South East Wales, target of 2,071 per year. 10 years
3 City Centre
Purpose built rental stock offers a new opportunity for investors
Joining up the city centre There is huge potential for regeneration, and the focus should be on delivering a mix of uses
The focus of the city centre has moved accommodate smaller occupiers as well However, there are 70,000 sq. ft. in recent years, with the redevelopment as the large anchor tenants. of long term voids that need to be of Central Square and the area There is a strong start-up community reconsidered for alternative uses. surrounding the station, the office in Cardiff with over 3,000 start-ups The extension of St David’s Centre market has shifted southwards, but registered in the city. This is a 10% over the last 10 years, has caused a shift there is still a need to ensure that increase from 2015, highlighting the in pitch for some of the pre-existing complementary uses are delivered and growth in Cardiff and the need for high street space, which now needs to that the new centres are connected both cheap, flexible space, suitable for look at alternate uses for upper floor with each other and the wider city. rapidly evolving businesses. Notably, retail space. the media sector in Cardiff has seen Looking ahead, property repurposing Demand for office space real growth. BBC Cymru will shortly will be a key theme for Cardiff. Cardiff’s office market is one relocate to a new HQ in the city centre, Demand is good for smaller units, but constrained by limited supply. There taking 155,000 sq. ft. at Central Square. voids within large boxes need more is strong demand for Grade A space This, coupled with the presence of strategic consideration. For example, and a significant under-supply to meet other media outlets such as Bad Wolf, the House of Fraser unit on St Mary this demand. This contributed to 2018’s Boomerang, S4C, and ITV Wales in Street accounts for 1.72 acres of ground fall in Grade A take-up to 180,000 sq. Cardiff Bay will act as a draw for media floor prime city centre frontage. The ft., 28% below the five year average. and tech businesses. The provision of retailer is proposing to significantly Refurbished space has helped fill this more high-specification, serviced and reduce its own footprint, but far from gap, resulting in rental growth of over flexible office space will be essential to leaving the retail pitch with a blight 30% for best in class refurbishments. the strength of this emerging sectors. of vacancy, is instead presenting the Over the next three years, demand landlord with a significant opportunity should be met by the delivery of over Repurposing retail to provide something new. 400,000 sq. ft. of commercial space The city centre has several distinct Current proposals include a hotel and at Central Quay, John Street and the retail zones that define their purpose, residential space, which will complement Interchange, of which around 50% will from the independents in the Arcades, the retail and leisure offer while reducing be speculatively developed. The city high end retail on The Hayes and mass the retail footprint of the city centre. also needs to think about what type of market retail in St David’s. Cardiff’s Going forward we anticipate more space is needed to attract occupiers. retail centre is more constrained than repurposing, more city centre living, and Office take-up in Cardiff has historically other major city centres and therefore more independents close to prime pitch. been lease-event led and not reliant is less impacted by significant tertiary on big ticket inward investment. This space with poor quality retail. The is likely to continue in 2019 with most retail void rate in the city centre is 15% demand coming from existing occupiers (about average for cities of this size), There are plans for within the city, so it is imperative that but the void rate within the retail core significant city centre the city provides a mix of floor-plates to is 9% (below average). residential development
4 City Centre
Figure 2 Cardiff City Centre and Bay
-- Expanding City Centre Cardiff Bay Retail Core International Sports Village Key Locations ■ Callaghan Square Central Station ■ Capital Quarter Regeneration ■ Central Quay ■ Central Square ■ Central Shopping Area ■ John Street ■ Proposed New Arena Site ■ Mermaid Quay -- Dumballs Road Railway Stations
Cardiff Bay
Source Savills Research
The role of residential currently in planning and a permitted play an important role in linking the Cardiff must offer the right blend of scheme due to start on site in Q2 2019. commercial centre with Cardiff Bay; working environment, infrastructure This tenure offers a good alternative for the site offers an opportunity to create and public amenity to attract occupiers investors who would have previously a new pedestrian route along the to the city centre. Residential considered student accommodation, riverside. The redevelopment should development will have a key role to play which, after several years of strong also link in to Canal Park and the new in this. Unlike other major UK cities, delivery, is already well supplied. Arena site at Atlantic Wharf, increasing Cardiff hasn’t seen the resurgence of Delivering residential in the city its role as a north-south link between city centre living or the completion of centre is also essential to supporting the city and the bay and joining with purpose built rental stock, with only other uses, particularly retail and the Eastern Bay Link road. 23 new build sales in 2018 (3% of all leisure. In turn, having high quality Although residential led, the new build sales) within 1km of Cardiff amenity provision makes the location Dumballs Road site will provide a mix Central station. This is despite Cardiff more attractive to office occupiers. of uses including workspace and retail. having a high proportion of 20 to 35 Encouragingly, there are plans for It is likely that a mixed use approach year olds relative to the UK average, the significant city centre residential will be key to delivering residential demographic most likely to value city development, including over 2,000 in central Cardiff, as using retail centre living. units to be delivered through Vastint’s and leisure as placemaking tools can However, purpose built rental schemes regeneration of the former industrial increase the residential values and are beginning to come forward, with two land at Dumballs Road. This will also improve the scheme’s viability.
5 Industrial and Logistics
The removal of the tolls from the Severn crossings has already resulted in a 10% increase in traffic
Unlocking the Capital Region’s potential Upgrading road and rail links has the potential to boost economic performance and create new opportunities for industrial and residential development
The South Wales Metro is the Lastly the region is benefitting from they will pay a rent in excess of £9 per cornerstone of the Cardiff Capital an upturn in manufacturing with Aston sq. ft. Moving further east, a site is Region City Deal, and is indicative Martin, TVR and train manufacturing expected to come forward at Magor of how important getting the right company CAF locating in the region. after Studwelders purchased 50 acres infrastructure in place is to the future Whilst these are positive investment for their own occupation and to promote success of the region. In addition, the in their own right, tier one suppliers industrial and logistics development. connectivity of the region has already to those businesses will look to locate Once infrastructure works are complete, improved with the removal of the tolls in the region to deliver components. this will be an attractive location for from the Severn crossings, although the occupiers and highlights the need to projected increase of 6 million journeys Rising rents bring forward sites closer to Cardiff. per year could pose further challenges Take-up has risen by 10% over the last With rents in South Wales set to rise if the proposed M4 relief road is not three years but the development market by 3.1% a year by 2023, landlords and delivered. has not reacted. Vacancy rates are at an developers would be advised to consider all-time low of 3.4% meaning occupiers speculative development of good quality Demand for industrial space will have to look to other markets to industrial space or the refurbishment The growth of the industrial market in satisfy their requirements. of second hand stock to bring it to the UK is well documented. South Wales This has already been seen with modern standards. There are long term has in the most part been sheltered from DPD recently committed to a 60,000 opportunities for site promotion around this increase in demand, however there sq. ft. pre-let at Pac Felindre where the proposed new road links. are reasons to suggest that this situation will change. The most immediate Figure 3 Falling supply has resulted in low vacancy rates structural change is the abolition of tolls from the Severn crossings, removing a ■ Supply Vacancy Rate significant cost within supply chains and 16,000,000 16.0% will make locations in South Wales more attractive compared to the South West 14,000,000 14.0% where rents are up to 30% higher. Infrastructure investment both in and 12,000,000 12.0% around Cardiff Airport has had a positive impact making it easier to access the 10,000,000 10.0% Airport and move freight from there. The recently added Cardiff to Doha 8,000,000 8.0% flight is projected to deliver 1,500 tonnes Supply (sq.ft.) 6,000,000 6.0% this year, up from just 5 tonnes the year before. With Cardiff Airport looking to rate vacany Industrial 4,000,000 4.0% secure more long haul flights this could make the region an attractive location 2,000,000 2.0% for freight forwarding companies, but having modern facilities a road network 0 0.0% that can handle the increased freight 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 traffic will be critical. Source Savills Research 6 Housing Delivery
Meeting housing need In 2017-18, 464 new homes were For these developments to be linking the valleys with the city delivered in Cardiff, well short of the successful, they need to be linked The second phase, will focus on an Local Plan target of 2,071. Affordable to existing employment centres, so integrated bus, train and tram system, housing requirements are assessed that housing growth can work in and has the potential to enable edge of at 6,646 affordable units for the Plan tandem with economic growth. settlement developments that aren’t period 2014-2026, equating to 554 units According to TomTom data, Cardiff served by rail stations to be integrated per annum. However, only 194 affordable already experiences journey time to the system. homes were delivered in 2017-18. increases of over 50% during the The final crucial infrastructure Getting the right infrastructure in morning and evening rush hours. piece will be the M4 relief road. place will be essential if Cardiff is Trying to deliver large volumes of edge The importance of this scheme was to provide enough housing to meet of settlement development without highlighted by the January 2019 demand. In the Local Plan, significant supporting it through an integrated rail statement, signed by 90 business allocations for residential development and bus network will only exacerbate figures and council leaders urging have been made, but much of it will be the travel challenges. the Welsh Government not to delay any through major urban extensions and This problem could be tackled in further. new garden suburbs, such as the 7,000 part by the South Wales Metro project. If the right transport network is home capacity Plasdwr site at North The first phase, currently underway is delivered, it will serve to unlock the West Cardiff. focusing on the existing rail network, huge growth potential of the city.
Figure 4 Infrastructure and strategic sites
M4 Proposed Cardiff Parkway M4 relief road
Cardiff Local Plan Strategic Sites
■ Cardiff Central Enterprise Zone ■ Former Gas Works, Ferry Road ■ North West Cardiff ■ South of Creigiau ■ East Pontprennau Link Road ■ South of Mellons Business Park ■ North East Cardiff (West of Pontprennau) ■ North of J33 on M4
Source Savills Research
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