COMMERCIAL
The office sector has been weakening
since mid 2008. In the first half of the year,
take-up was level with 2007, but in the
second half of the year it fell markedly,
bringing the year as a whole below the
average level of the past five years.
The market for office space has become
increasingly polarised, with prime space
doing best. If anybody’s moving, they’re
There are ten to
moving to Callaghan Square, Young says;
that’s a prominent MEPC scheme, which
fifteen local
has planning permission for another
500,000 square feet. Otherwise, office
developers who
enquiries are few and far between, and are
mainly public sector orientated. Smaller
lead the market,
office premises are seeing a very low level
of lettings and significant incentives being
and they’ve put
given to new tenants.
Supply increased from 925,000 to
everything on hold.’
1,189,000 sq ft by the end of 2008; Alder
King’s Market Monitor forecasts that it will
owen Young, Alder king, increase further in 2009, with the
completion of space at Capital Link and 3
might only achieve £8. “The smaller offices Assembly Square. Unsurprisingly, Owen
are going to be more vulnerable,” says Young says, “Rents have been slashed on
Thompson, “and there are lots available.” offices.” Grade A is holding up, largely due
Investors are interested, but activity is to the fact that up till twelve months ago
very low. “We’ve got people who want to there was a shortage of Grade A stock, but
buy in the prime space,” Thompson says, secondary rents have been hard hit.
“but no-one’s selling. Values have shifted by For instance, in the secondary market,
30 per cent or more, but you can’t get the Main pic: Cardiff Bay; Above: Raleigh Walk Gleidr House in Llanishen was quoted at
kit.” The prime market in Birmingham is Cardiff; Below: Callaghan Square £11-12 a square foot but is now at £5, while
very small in size and there’s very little on Bottom: Seaview, Ocean Park Seaview Buildings, Ocean Park was quoted
the market. When one property in St at £12.50, and is down to only £6. By
Philip’s Square came up for sale recently, comparison, Grade A rents of around £20-
bids were submitted and, Thompson says 22 are holding, but with highly incentivised
crossly, “We were gazumped!” deals sometimes needed to compete.
In retail, the good news is that the new
A weAkening mArket in CArdiff John Lewis store in the St David’s 2 scheme
Owen Young, partner in charge of agency is going ahead, despite the retailer having
at Alder King in Cardiff, warns that what’s cancelled a number of store openings in
true of Birmingham is not true of Cardiff. other locations. But Owen Young points
“Every one of our offices is different – the out that, “while John Lewis is the anchor
market is different in each location,” tenant, I don’t think they’ve got many other
something he knows through liaising with tenants signed up.” That leaves the
other Alder King branches. In Cardiff, the property less than 50 per cent let. Retail
office market has weakened, but industrial incentives have increased, even where
enquiries were holding up well. rents have been stable. Anecdotally Land
But the development scene is very Securities may be offering as much as three
similar to Birmingham’s. There are ten to years’ rent free at St David’s 2.
fifteen local developers who lead the
market, and they’ve put everything on industriAl spACe for a £1 sq ft
hold. “People are not even finishing off Owen Young says industrial space,
schemes,” Young says. Even schemes that particularly in the M4 corridor, was
have been pre-let may no longer stack up if holding up well till recently. “We’ve seen a
finance is required. Newport has done little flurry of activity at Cardiff Gate
particularly badly; “it’s almost completely Business Park,” he says, with some good
on hold,” with the railway station recent lettings. But he doesn’t expect to see
redevelopment and new rugby ground much improvement while manufacturing
both being held up. closures continue to have an impact on the
72 JUNE 2009 PROPERTYdrum
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