The Cardiff Report 2018 the Cardiff Report 2018 Research
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RESEARCH THE CARDIFF REPORT 2018 THE CARDIFF REPORT 2018 RESEARCH CONTENTS FOREWORD 2-3 Foreword 4-5 The UK economy MARTYN PHILLIPS 6-7 Occupational market WRU GROUP CHIEF EXECUTIVE 8-9 Capital markets I consider myself very fortunate to be responsible for Cardiff’s Principality 10-11 Building for the future Stadium. Besides being the home of the The peppering of crane Welsh Rugby Union (WRU), the stadium masts highlights the is, in my opinion, a development success 12-13 Build to rent central role of the built story for the city. It is globally recognised environment in the future 14-15 Forward thinking and forms a strong symbol of the ambition of Cardiff. Most importantly for me, it is of the city region. 16 Key contacts pleasing that the role of the stadium is being seen and used as a precedent for others to follow. Since I arrived in Cardiff three years ago, I have witnessed a renaissance of the city. Its skyline seemingly changes with unrelenting regularity, with the peppering of crane masts highlighting the central role plans for an integrated Metro Transport of the built environment in the future of system. Each project will serve to open the city region. The successes at Central up new areas of the city and allow for a Square, Capital Quarter and St David’s seamless movement of people across Shopping centre, clearly demonstrate Cardiff city-region and beyond. what can be achieved through public and These are exciting times for the city. private partnership. These have been Cardiff is on a journey to build a reputation complemented by the flurry of new hotels as a key location for innovation, invention which signpost an increasing number of and industry. The vision of Cardiff and visitors to the city. the Welsh Rugby Union is a shared one. The improvement plans for transport Global recognition. I do hope that over the infrastructure will be the next ‘game coming years, in my role at the WRU, one changer’. The vital electrification of the of my achievements will be to play a small rail route to London is due in 2019. This part in the renaissance of the city that I am coupled with the regeneration of Cardiff passionate about. The ambition to create Central will create a modern, high speed a dynamic, modern and vibrant global city, gateway fit for a capital city. Let’s hope is being recognised and acted upon. We it becomes a reality. The Welsh and UK must maintain momentum and recognise Government are soon to decide on the M4 that continual progress means the work relief road and have outlined ambitious will never quite be finished. 2 3 THE CARDIFF REPORT 2018 RESEARCH RESILIENCE: THE UK ECONOMY IN 2019 After two years of growth continuing in the face of Brexit, it is apparent that politics and the economy are on divergent courses. A recurring theme when analysing the UK under the watchful eyes of the party economy’s performance since the vote for whips. Throughout the Maastricht Brexit in June 2016, has been divergence EU treaty debate in the early 1990s, between what one would expect to see John Major’s premiership was always as a result of the rollercoaster politics and reported to be hanging by a thread, what has appeared in the statistics. with Eurosceptic Tory backbenchers threatening rebellion. However, the The political debate has been angry, Maastricht treaty passed through polarised and has shown little concern Parliament, and John Major stayed in for the impact on business sentiment. Downing Street for several more years. However, the economy has continued to grow, unemployment has fallen, and the digital revolution has continued undaunted. Canada +++ GDP growth over the summer months Will history repeat itself? At present, for could actually be described as punchy. the tail wagging the dog scenario, the Rather than having to support the hard Brexit enthusiasts need to increase economy with looser monetary policy, the their numbers from a current tally in Bank of England has had the confidence the low fifties to the 326 supporters to raise interest rates, and signal an necessary for a majority in the House intention to do so again in the near future. of Commons. This seems like a high mountain to scale in the space of a few Future trends Figure 1 Remember Maastricht? months. Brexit ending in a fudge, with UK GDP over the previous three months the UK remaining in a transition period Moreover, despite the ocean of newsprint The political debate has been 0.8% The obvious retort to this is: the UK is still until at least December 2020 is an Brexit has attracted, it is not the biggest angry, polarised and has in the EU. Correct, and in a hard Brexit outcome easier to picture. During this trend shaping the economy, and we see 0.7% scenario it is very hard to imagine the period, our expectation is a Canada +++ firms and investors focussing more on shown little concern for the economy would not take a hit, although trade deal will be adopted, as already these other factors in 2019 and 2020. 0.6% impact on business sentiment. it remains to be seen whether no deal hinted at by the EU’s chief negotiator, For some time the UK has been facing 0.5% The economy has continued will be the outcome. At present, no deal Michel Barnier. a growing labour shortage, with unfilled to grow, unemployment has is an outcome popular with a minority of job vacancies at a record high, and 0.4% Such an outcome would allow fallen, and the digital revolution approximately 40 or so Conservative MPs, businesses to plan for the future, which employers struggling to find qualified 0.3% and a dozen Labour members, in a House has continued undaunted. will release to the property market those candidates when recruiting. This will of Commons of 650 representatives. Can 0.2% occupier searches that have been on focus employers’ attention on providing the tail really wag the dog? Perhaps, but hold while executive boards monitored workplaces that enhance staff retention. 0.1% like all shock events, such a surprising the progress of the Brexit talks. However, Also, the GDP figures show the tech and outcome needs to be witnessed before 0.0% occupiers coming to the office market media sector has very much shrugged off it becomes the central scenario in an will find that the Brexit uncertainty has Brexit, and delivered consistent growth -0.1% economic outlook. dampened speculative development momentum. Cities, such as Cardiff, with -0.2% Politicians can be much braver speaking activity, and choice of genuine prime a strong appeal to this rising business AUG-17 SEP-17 OCT-17 NOV-17 DEC-17 JAN-18 FEB-18 MAR-18 APR-18 MAY-18 JUN-18 JUL-18 AUG-18 ‘off the record’ to journalists than when is now limited in many cities. This is a sector are in pole position to lead JAMES ROBERTS, PARTNER they are heading for the division lobbies, recipe for rental growth. economic growth. Source: ONS 4 5 THE CARDIFF REPORT 2018 RESEARCH Availability Grade A availability had risen at the end of Q3 with the completion of No.3 Capital OCCUPATIONAL Quarter to 167,995 sq ft, 24% above the 5-year average for the city. Even so, the major letting to Admiral Insurance and MARKET significant current interest for the remaining Grade A space in the city will mean a Occupier activity has remained strong, but limited supply has return to a level below 100,000 sq ft by constrained take-up levels through 2018. Pressure on rent and the year end. incentives has increased as competitive forces have built up. The only new space being delivered in 2019 will be the completion in March of The appeal of the city No.4 Capital Quarter comprising 87,860 continues to grow for sq ft of Grade A accommodation. With occupiers, with the list Take-up and demand is the headline deal of 2018 so far. considerable interest being maintained, Admiral are at capacity in their Ty Admiral of businesses choosing Following two record years of office the trend of occupiers committing HQ on Bridge Street and the new lease Cardiff increasing. take-up in Cardiff, a lack of supply of to new stock during the period of retains one of Cardiff’s most significant construction is set to continue. The other both Grade A and Grade B stock has employers and the only FTSE 100 notable completion in 2019 will be the hindered leasing volumes in 2018. Take- company headquartered in Wales. comprehensive refurbishment of Hodge up had reached 300,000 sq ft at the end House in the heart of the city centre. of Q3, 20% below the long-term average The largest single office deal in 2018 was With work scheduled to commence in for a Q1-Q3 period. The lack of new the purchase of the 85,207 sq ft Woodland the new year, the landlords Cat A works office stock has been a particular factor, House in North Cardiff that was acquired will deliver 67,250 sq ft of high quality with transactions of Grade A offices by Cardiff and Vale University Local Health Board to house their administrative accommodation incorporating some of accounting for 11% at Q3 compared MARK SUTTON, functions. The former Tesco House was the largest floor plates in the city at to 35% in 2016 and 67% in 2017. The PARTNER occupied by the supermarket for 25 19,000 sq ft.