Cardiff is now firmly established as of the 海角视频’s leading cities for property investors, but needs to cement its improved status by creating better transport and digital connections between its centre and Cardiff Bay, says Knight Frank.
In its annual Cardiff Report the property advisory firm said the capital city is now a top eight location in the 海角视频 for property investors, in a middle tier behind London, Manchester and Birmingham, alongside the likes of Bristol, Leeds, Edinburgh and Cambridge – underpinned by an improving headline rent and good rates of return for investors.
It says Cardiff’s built environment will continue to play a key role in the city’s progress, with the new, modern space bringing high profile occupiers to the city.
Although it said there currently just over 100,000 sq ft best quality grade A office space in the marketplace.
The report warns that better physical and digital connectivity is necessary if Cardiff is to reach its potential, and calls for the city centre core and its waterfront to be linked as one.
Matthew Phillips, head of the Cardiff office of Knight Frank, said: “Cardiff has become a dynamic and vibrant city able to respond to the demands of modern working and lifestyle.
“Beacons of progress are plentiful: Central Square, Capital Quarter and St David’s Shopping Centre, and not forgetting Cardiff’s Principality Stadium, are all examples of the ambition of Cardiff.
“Now the city must promote its attributes to the industries of tomorrow and dispel any perception of being a low-cost option for back office functions.”
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Mr Phillips added: “There is a need for the city core to extend to accommodate growth, and it is time for the city and its waterfront to be one.
“An extension of the Metro project, with a light rail connection to Cardiff Bay, and potentially beyond to the east of city, would be a vert welcomed development.”
The report says Cardiff continues to offer opportunity for property investors in all asset classes.
The city was high on many global investors’ shopping lists due to its growing attraction to large and international businesses opportunities.
Mr Phillips said: “Cardiff is high on many global investors’ shopping lists because of its ever-growing profile and quality of life offered.
“Cardiff regularly ranks as one of the top places to live, with a wonderful history, first-class higher education facilities, and a burgeoning tourist industry and now it is rapidly becoming a significant technology, media and telecommunications (TMT) hub.
“Rental growth and tenant demand are anticipated to continue to grow across the city.
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“This will improve investment performance, meaning acquisitions should be evaluated by their equivalent yields, internal rates of return of cash-on-cash returns rather than the level of ‘day one’ return that they provide to an investor.
“These initial yields only tell part of the story – purchasers need to understand the city’s future vision and the medium to long-term employment objectives.”
Over the last year the city has secured 12 inward investment projects, far higher than the previous five year average.
Mr Phillips said: “It is hugely encouraging to see new investment and companies being attracted to the city, including those in tech and financial services, and choosing Cardiff over rival 海角视频 cities.
“This in turn is fuelling demand for quality office space and provides a more balanced tenant profile, alongside indigenous firms seeking more space to expansion.”
Knight Frank said that the city’s current headline rent of 25 per sq ft will be eclipsed with new office developments over the next few years at John Street, from JR Smart, and Rightacres with its Central Quay development at the former SA Brain & Co site, achieving in the region of £28 per sq ft.
The report says that investor opportunity to date have mainly been derived via new development, with Aviva Investors’ sale of Cardiff Waterside to American investor Global Mutual for £84.5m last year a prime example.
The scheme consisted of 400,000 sq ft of office space across seven buildings – alongside development sites with planning already in place for around 360,000 sq ft of office space.
In addition, L&G had been an integral part of the development of Central Square with the final phase now agreed, and will deliver a new bus station, 318 build to rent (BTR) apartments, and more than 100,000 sq ft of Grade A office space at the Interchange scheme.
L&G had also agreed to forward fund the Department of Work and Pensions’ new HQ in Treforest to the tune of £52m at a yield of 4%.
The city’s employment base had strengthened, with leading companies such as Admiral, Deloitte, Legal & General (L&G) and Hugh James. This strength of covenant had also proved important.
LaSalle Investment Management’s purchase of the Admiral HQ building for £86.7m in 2018 was demonstrative, with the deal representing a yield of 4.21%.
This extremely low yield was consistent with pricing paid in central London.
Looking ahead, Knight Frank said that Cardiff is experiencing clustering from high growth sectors, with occupiers from technology, fintech, the creative industries, life sciences and advanced manufacturing gaining prominence.
Specifically, technology occupiers represented close to 15% of offices demand in 2018.
Challenger banks Starling and Monzo have taken space in the city this year, as well with specialist insurance software provider Sapiens and financial technology provider Delio.
Employment growth from the sector is projected to be 15% over the next ten years.
Mr Phillips said: “Suitable space is in short supply to support growth, which presents an opportunity for dedicated development and funding.
“Investor interest of course, will depend on risk appetite given the absence or unproven covenant profiles,” added Matt Phillips.
“Cardiff has been identified as one of the 13 fastest growing tech clusters, surpassing £1bn according to Tech Nation.
“With a pioneering start-up community, the most dominant stage for tech companies in the city, it hosts more than 90 digital firms that have been established in the past three years.
“Consequently, with a growing tech cluster, the city has generated employment opportunities, with 45,000 employed in digital tech.”