Wales Space as a Service - The Future of the Workspace

By 2030, according to Forbes, millennials will make up 75% of the workforce. Digitally wired since their childhoods, millennials favour work-life integration rather than work-life balance reflecting the way today’s boundaries between professional and personal life are constantly blurred. This shift has fuelled the importance of developing innovative and dynamic workspaces, already welcomed by many corporate occupiers, landlords and developers. The likes of Facebook, Google and LinkedIn and the emergence of office space disrupters such as WeWork and The Office Group have been setting the pace. The workspace has already become a key component in attracting and retaining talent.

Against this backdrop, how is Cardiff doing when it comes to providing occupiers with commercial space? According to Knight Frank, between 2018-2020, Cardiff will see an office development pipeline of 733,000 sq ft: 543,000 sq ft more than its close neighbour Bristol. This is good news as a lack of supply in both Grade A & B stock has held back leasing volumes in 2018. Notwithstanding Brexit bleakness, figures due to be released this week show increases in company formations in Birmingham, Manchester, Leeds, Bristol and, of course, London. With “scale-ups” arguably more valuable to the economy than “start-ups”, there is clearly still a buoyant positivity around. In order for Cardiff to become an even more progressive city and a serious option for a wide cross section of corporate occupiers, it must embrace these trends and ensure they infiltrate commodity based workspaces.

Our clients tells us they see five fundamental trends that are shaping the future of the workspace:

Matthew Jones: In my View

The political uncertainty attributed to Brexit continues to have a major impact on the commercial property market in Wales.

However, despite the uncertainty the Cardiff city centre office market remains strong. Deloitte have taken another two floors of Fusion Point 2 taking the total

occupation in the building to 45,000 sq ft. Fletcher Morgan acted on behalf of the landlord Fidelity International. Hugh James have moved into their new 100,000 sq ft HQ at Central Square and work is under way on the new GPU to occupy 269,000 sq ft. Following the successful lettings at No.3 Capital Quarter, JR Smart are due to complete No. 4 later this year. Headline rents ranging from £19.50- £25 per sq ft. These lettings highlight the demand from established operators looking to relocate or expand within Cardiff. However, the pipeline for grade A space is drying up. This has therefore seen an increase of secondary office space undergoing extensive refurbishments to help fill the gap. Notable buildings including Hodge House which is currently undergoing a comprehensive refurbishment and circa 65,000 sq ft will be available to let from summer this year. The strong office market is highlighted by the purchase of Capital Tower by Trinova Real Estate for £25 million, following Toplands refurbishment to the tallest office building in Wales. Furthermore, Global Mutual Properties acquired the Cardiff Waterside office estate from Aviva for £84.5m, 8.25% NIY. Covering 11.8 acres, the scheme comprises 402,309 sq ft of Grade A offices with further development opportunities. Alongside this Cardiff Bay scheme is the Welsh Government’s 34-acre Porth Teigr site which is generating office development interest.

Office demand outside of Cardiff remains limited. However, there are signs of improvement in Newport with Garrison Barclay Estates


refurbishing the old Chartist Tower into a new 4-star Mecure hotel which will include circa 25,000 sq ft of grade A office space on the lower floors. In addition, they intend to provide a further 59,255 sq ft of grade A offices at the former Royal Mail site on Mill Street.

From a retail perspective, the past year has been a further example of the failing High Streets in most Welsh towns. A year notable for more shop closures than openings, drastic changes need to be made to the structure of High Streets and the incentives offered by landlords and Councils. Out of town retail activity remains stable but only a handful of occupiers remain active. The likes of Aldi, Lidl, B&M, Iceland and Home Bargains have capitalised on recent CVAs of Homebase, Poundworld and The Original Factory Shop. Notable investor activity in the out of town market was the purchase of Valegate Retail Park in Cardiff for £12.5 million (10% NIY). The 94,000 sq ft retail park was bought by New River Retail.

The industrial market has shown signs of improvement with an increase in demand for 50,000 sq ft + units for production and distribution companies looking to locate in Wales. This should continue to increase with the removal of the severn bridge toll, however, the Welsh Government needs to strongly consider investing in the M4 relief road to help with the ever increasing congestion around Newport. Despite this the supply pipeline for good quality stock remains limited. Notable new build opportunities at Celtic Gateway in Newport and Coryton in Cardiff are available but headline rents will need to shift considerably to circa £7 per sq ft to be viable. Glynstell Park was the most notable refurbishment in 2018 offering units ranging from 12,500 sq ft - 56,524 sq ft of high- quality modern units which were fully let by the end of 2018.

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Coworking to coliving - the rise of coliving spaces will continue. These spaces offer a fresh take on communal living and working targeted specifically at millennials and the post millennial “Linkster” generation. Pure House and Common have become the leaders in this sector. This is living for the digital nomad: if our workplaces ignore these trends, they risk archaism.

Wellbeing - creating a happy and fulfilled workplace not only facilitates employee wellness but also productivity levels.

Flexibility - with the rise of coworking, individuals are seeking flexibility and options on how they work.

PropTech - AI, virtual reality and flexible working technological advances are allowing individuals to work from anywhere.

Warm homely office design - future office designs will see an increase of elements normally associated with the home. Breakout areas, sofas and kitchens are fast becoming the norm for office space interior and furnishings.

Can we see Cardiff becoming a provider of innovative and dynamic workspaces alongside the giants that are London, Birmingham and Manchester? The Central Square development has already developed mixed use spaces and in so doing attracted long term commitments from the BBC, HMRC and Cardiff University. But to where from here? A brave endorsement of these evolving workspace trends may yet make Cardiff a serious corporate hub contender.

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