UK Commercial – Autumn 2019

SPOTLIGHT Savills Research Cardiff Offices

Occupational Investment What Workers Want Cardiff Offices - Autumn 2019 £ 293,000 sq ft 35% Top sectors £25 of take- in wider Cardiff during of take-up was TMT (27%), Insurance & (14%) Top achieved rent - offering an affordable the first three quarters of 2019. Grade A. & Public Services, Education & Health (12%). alternative to other regional cities.

Cover: John Street, Callaghan Square. 109,000 sq ft is available, with completion due in the summer of 2021.

Battle of the challenger Banks

During Q3, challenger banks Starling and both acquired office space in Cardiff city centre. took 14,000 sq ft of Grade space at Brunel House, their first letting in Cardiff and Monzo Bank signed for 6,000 sq ft of additional Grade A space at 2 Kingsway.

Challenger banks have changed the face of digital banking in recent years, without physical branches they use the accessibility of online banking, as well as generate intelligent reports on Central Square. Work is underway on the new Interchange building which will include 120,000 sq ft of offices. spending habits to secure customers. Both Monzo and Starling have been around for less than six years and have Occupational overview risen rapidly during that time. Monzo Cardiff has seen a steady stream of deals during the first three currently has over 2 million customers quarters of 2019. and Starling is expecting to reach 1 million customers this year. During the first three quarters throughout the year. Supply in 250,000 sq ft, but we understand of the year, take-up in Cardiff’s wider Cardiff currently totals Rightacres will not commence Starling Bank will soon open their first wider market reached 293,158 sq 1,032,000 sq ft, although just over works on this until 50% is pre-let. office in Cardiff, which will be its third ft, 2% down from the same time 100,000 sq ft of that is considered last year although significantly to meet Grade A standards. Refurbishment opportunities UK location after London and below the five-year Q1-Q3 exist at Hodge House and Southampton, with plans to expand average. The majority of deals However, occupiers looking Fusion Point. Legal and General further into Europe. The online only occurred within the city centre, for space within Cardiff can are spending £10 million Bank which launched in 2014 is totaling at 197,101 sq ft (67%), 34% look to the development and transforming Hodge House where currently recruiting for a number of up from the same time last year. refurbishment pipeline for pre-let 67,000 sq ft of contemporary roles in the city including researchers, As we approach the end of the opportunities. Cardiff isn’t due office space will be available product designers and data scientists. year, Savills expects take-up in to see any new deliveries during by the end of 2019. Fidelity are In October 2019 Starling Bank raised Cardiff’s wider market will reach 2020, which is opportunistic for refurbishing the 63,000 sq ft £30 million of venture capital in a deal around 400,000 sq ft for 2019. the buildings currently being Fusion Point building which will lead by Merian Chrysalis investment. refurbished. There are, however, be ready for occupation by mid- The funding will support increased Tech, Media and Telecoms two significant developments 2020. investment into the bank enabling it to (TMT) have dominated take-up completing in 2021 and 2022. accelerate its Europe expansion. accounting for 27% of deals Cardiff is currently the most thus far. This was largely due to JR Smarts’ John Street affordable office market within Monzo Bank currently employ in Sky who leased 40,000 sq ft of development, which is currently Savills key regional office excess of 150 people in the city, but this new Grade A space at 4 Capital under construction and due to markets, a factor which is likely expansion will see that number rise to Quarter, along with 12 sub- complete in 2021, has a total to increase in importance as 312 over the next few years. Monzo’s 10,000 sq ft deals, which included area of 109,000 sq ft, all of regional rents see significant expansion was helped along by a nearly tenants Incopro, Sapiens and which is available for pre-let. growth. Grade A rents in Cardiff £1 million backing in finance from the Loop up. Other active sectors The Interchange, which is due currently sit at £25 per sq ft, Welsh government. Monzo considered have included Insurance and to complete in early 2022 has a offering a 29% discount to south Financial Services and Public total area of 120,000 sq ft all of west rival Bristol and a 32% a number of alternative locations within Services, Education and Health which is available for pre-letting, discount to Manchester. Savills the UK as well as overseas before which accounted for 14% and 12% although there is rumoured expects Cardiff will see rental settling on Cardiff. of take-up, respectively. to be interest from Legal and growth as deals begin to complete General in this. There is also a at new developments, forecasting Cardiff is expected to see total GVA Currently, Cardiff suffers from further development proposed, rents of £27 per sq ft in 2020, growth from the insurance and financial a lack of Grade A space which is The Ledger Building on Central rising to around £28 per sq ft in services of 4.2% over the next five years likely to have suppressed take-up Quay has a proposed total area of 2021. rising to 14.3% over the next 10. Demonstrating the benefits from the growing financial service sector in Cardiff. 0.6 230,000 9% Years of Grade A sq ft of pipeline on-site available Grade A supply to be let during construction Vacancy rate savills.com/research 1 Cardiff Offices - Autumn 2019

INVESTMENT OVERVIEW Cardiff wider market take-up by quarter.

So far this year, Cardiff has seen total Q1 Q2 Q3 Q4 commercial investment volumes of 800,000 £365 million. The majority of this was for alternative investments due to a 700,000 £235 million student housing deal. 600,000 )

Office investment has been relatively ft slow which is unsurprising following 500,000 sq two years of exceptionally high up ( volumes. During Q1-Q3, Cardiff saw - 400,000 total office investment volumes of

£62 million, 26% below the 10-year Take 300,000 Q1-Q3 average and significantly down from the same period last year. 200,000 Although a further £26 million has completed during October pushing 100,000 YTD volumes up to £88 million. 0 Key deals this year have included the 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 sale of Crickhowell House for £47 Source Savills Research million to Equitix and the purchase of Three Capital Quarter by Mayfair Between now and 2024 Cardiff is forecast to see... Capital for circa £26 million. Along with Six Park Street, which was sold by Mayfair Capital to ADAPT Properties for £10 million reflecting an impressive 5.6% yield.

Prime yields in Cardiff remain at 5.5% having remained stable throughout 6.8% 10.5% 8.8% 18.5% 2019. Total office based Employment growth Total office based GVA growth from the employment within the GVA growth. information and growth. professional scientific communication and tech sectors. sector.

Source: Oxford Economics What Cardiff Workers Want? Office investment has accounted for Savills UK What Workers Want survey investigates the wants and 24% of Cardiff's commercial investment volumes. needs from the workplace across 14 UK cities; in Cardiff the view from the workplace and its proximity to retail and leisure facilities were of significant importance.

The war for talent has secured Office workers in Cardiff were At present Cardiff struggles with wellbeing, staff attraction and also more satisfied than the rest a lack of available Grade A space 53% retention at the forefront of of the UK with their proximity to with no new deliveries until 2021. of office investment has been from occupier’s minds. Savills latest green spaces along with retail and There is, therefore, demand for financial institutions, the most active What Workers Want survey aimed leisure space. This is unsurprising refurbishments which can reach investor type so far this year. to discover exactly what today’s as Cardiff has more green spaces completion faster than new office workers want and need from per person than any other UK core developments. Throughout 2019 their workspace. city. Cardiff also benefits from the alone Cardiff’s refurbishment biggest concentration of Victorian, market has benefited from rental Cardiff is a vibrant and historic Edwardian and modern-day growth of 3.2% and as new city, its ancient castle and scenic indoor shopping arcades in Britain refurbishments come to market 67% views make it a tourist hotspot leading to it being described as the this growth will continue. within the UK which sees ‘city of arcades’. approximately 18 million visitors So far this year 67% of office per year. This was reflected in the Cardiff workers were however investment into Wales has occurred within Cardiff. results with Cardiff office workers found to be less satisfied than the claiming to be more satisfied than rest of the UK with the internal rest of the UK with the views and external design of their office from their workspace, while also building, suggesting there are rating this a factor of significant opportunities for developers and 5.5% importance. landlords operating within Cardiff. Current prime office yield in Cardiff Office workers in Cardiff were also more satisfied than the rest of having remained stable throughout the UK with their proximity to green spaces, this is unsurprising as the year. Cardiff has more green spaces per person than any other UK core city. 2 Savills Commercial We provide bespoke services for landowners, developers, occupiers and investors across the lifecycle of residential, commercial or mixed-use projects. We add value by providing our clients with research-backed advice and consultancy through our market-leading global research team

Research

Pearl Gillum Commercial Research 0207 535 2984 [email protected]

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