Take-up of large industrial spaces in Wales experienced a significant decline in Q3 2024, revealing shifting market dynamics.
- Research by Knight Frank highlighted a reduction in activity, with only 342,000 sq ft taken compared to 680,000 sq ft in Q2.
- Five leasehold transactions composed the Q3 activity, three in South Wales and two in the North, showing regional variations.
- Market sentiment indicates a slowdown due to political events and cautious financial practices extending deal timelines.
- Despite challenges, demand for prime spaces continues, with rising rents and certain units already under offer.
Recent data from Knight Frank reveals a notable downturn in the demand for large industrial properties in Wales during the third quarter of 2024. The uptake was recorded at just 342,000 square feet, a dramatic reduction from the 680,000 square feet seen in the previous quarter. This downward trend comes amid broader market movements as the year-to-date transactions align closely with 2023’s overall figures.
The transactions completed in the third quarter all involved lease agreements, suggesting a potential shift in occupier strategy or market conditions. Of these, three deals were executed in South Wales, with the remaining two in North Wales, indicating regional-specific activity patterns. The quarter’s most substantial transaction involved Roche Logistics acquiring 77,000 square feet at the South Wales Distribution Centre, completing the capacity of the Kenfig Industrial Estate.
This slump in activity is attributed, by market experts, to a slowed economic environment driven by electoral periods and a subdued summer. Such factors contribute to extended due diligence processes, as both occupiers and financiers exercise heightened caution. These processes are increasingly lengthening deal completions, particularly affecting larger properties exceeding 50,000 square feet.
Despite the decline in transactions, rental rates for premier spaces are on an upward trajectory, demonstrating sustained appetite for high-quality assets. Notably, the last available unit at Phase 3, Indurent Park in Newport, was leased at a new high for estate headline rents. This indicates underlying strength in the primary market segment.
Available large industrial units in Wales remain at approximately 5.2 million square feet, unchanged from the prior quarter. Notably, 16% of this capacity is occupied by the former Wilko distribution centre in Magor, which is reportedly under negotiation with a prospective data centre operator. Significant interest in Grade A spaces remains, with key properties like RYB 1 at Ebbw Vale and Unit 10 at Indurent Park, Newport, anticipated to close in the following quarter.
Looking forward, the release of the 125,000 square feet Avara Foods site in Abergavenny adds intrigue to the market, given its considerable expansion capabilities that have consequently attracted significant interest. Firms seeking well-situated freehold properties that allow for subdivision and redevelopment are particularly drawn to this opportunity, as evidenced by offers surpassing the initial guide price.
The scarcity of quality secondary industrial locations, especially proximal to the M4, continues to challenge the market dynamics. Property owners who have invested in significant refurbishments have witnessed strong demand, whereas those holding properties of inferior quality in less favourable locations are experiencing dwindling interest and rent adjustments.
The current landscape for industrial property in Wales highlights both challenges and opportunities, driven by market conditions and ongoing demand for prime locations.
