The annual Cardiff Report from property consultancy Knight Frank shows that Cardiff’s commercial real estate sector continues to demonstrate resilience, with occupier demand for offices rising as companies increasingly adopt an ‘office first’ position.
The report shows that those seeking office space are becoming more selective, with high-quality, amenity-rich office spaces that support health, well-being, and sustainability objectives foremost in demand.
Matt Phillips, head of the Cardiff office of Knight Frank, said:
“This occupational realignment is having a profound impact on the property landscape in Cardiff. While there is a plentiful supply of commercial spaces in Cardiff, there is a notable shortage of properties that meet this evolving criteria of active occupiers.
“The market is polarising at pace, with new or recently refurbished buildings generating healthy occupier attention. Older buildings lacking significant capital improvements, however, are experiencing greater challenges. Herein lies both the challenge and opportunity for Cardiff.”
Knight Frank’s research reveals that total Cardiff office take-up in the third quarter topped 146,000 sq ft, the highest quarterly total since Q4 2020. Year-to-date, a total of 334,500 sq ft has been leased, 56 per cent ahead of the equivalent period in 2023 and the strongest first nine months of a year since 2017.
In 2024, three deals over 20,000 sq ft were completed, the highest number of deals of this scale during a Q1-Q3 period for two years. Notably, the average deal size for the year-to-date is 4,711 sq ft, the highest since 2020.
The largest deal to complete in 2024 was the Welsh Government acquiring a 51,400 sq ft former Lloyds office building at Cardiff Gate Business Park to support the expansion of the compound semiconductor cluster in South Wales.
The other two deals over 20,000 sq ft were PWC taking 33,200 sq ft at One Central Square and Aldemore Bank taking 28,100 sq ft at Two Central Square.
Matt Phillips added:
“So far this year companies originating from the financial services and insurance sectors have been particularly active, accounting for 27 per cent of the total office space take-up. Notably, four out of eight of leasing deals involving spaces over 10,000 sq ft were secured by firms from these sectors.”
According to the Cardiff Report, office vacancy levels have increased in recent years, and, as of Q3, the overall vacancy rate in the core Cardiff City and Bay market was 9.9 per cent, a slight fall compared to the peak of 11 per cent earlier in the year. Inclusive of out-of-town areas, vacancy rates were 11.1 per cent in Q3.
Matt Phillips said:
“This elevated vacancy rate masks the complete picture. Grade A availability has steadily declined during the year to reach 324,000 sq ft at the end of the third quarter and this meant that the vacancy rate for new and Grade A spaces dipped to 3.8 per cent, meaning the gap between total availability and that of ‘best quality’ is now the widest for 10 years.”
The report shows that the city’s development pipeline remains limited for those targeting new space. At the end of the quarter, John Street was the only new speculative office development under construction in Cardiff city centre. Being developed by JR Smart, the building is due for delivery by the end of 2025 and will provide 107,000 sq ft of office accommodation with floor plates of 13,000 sq ft.
While rents increased in Cardiff during 2024 the gap compared to other regional markets also increased, the research reports. During 2024, prime office rents in Cardiff increased to £28.00 per sq ft – the first increase in prime rents since 2016, highlighting a turning point in the market. Alongside this, the average market asking rents also experienced growth, rising to £18.50 per sq ft from £17.50 in 2023. This upward trend in prime and average rents reflects Cardiff’s competitive market for better-quality spaces.
However, despite this uplift, the disparity between Cardiff’s prime rents and those in other major regional cities expanded significantly. By the third quarter of 2024, the average prime rent across other significant regional cities stood at £38.00 per sq ft, with the highest
rents reaching £48.00 per sq ft.
“The gap between Cardiff and these other cities is the widest recorded in Knight Frank’s data,” said Matt Phillips, “albeit given the falling availability of best quality space, competitive pressure will apply extra upward pressure on rents at this end of the market.”
