Spotlight: Cardiff Offices – Spring 2017

Due to rising construction costs, parties are now buying existing rather than developing new stock, adding further downward pressure on prime yields

■ The key deals during the first quarter were Cardiff University's 45,000 sq ft letting of Two Central Square, which is now fully occupied, and Network Rail taking 31,500 sq ft in St Patrick's House.

■ Strong take-up has left the office market facing a shortage of supply. Wider market supply has fallen 5% to 1.2m sq ft since the end of 2016.

■ We expect top rents to remain stable at £25 per sq ft throughout 2017 following the steep jump from £23 during 2016.

■ The shortage of investment deals so far during 2017 has been largely down to the pricing mismatch between buyers and sellers, as well as the lack of pressure to sell.

■ Rising construction costs are now driving some investors to consider buying, rather than develop new stock, adding further downward pressure on prime yields.

■ We expect prime yields to remain stable going forward, with sustained demand for well let assets from the overseas market, who continue to benefit from a weak sterling.

2 Kingsway, Cardiff

▲ Ardstone's 2 Kingsway, above, currently provides 41,000 sq ft of comprehensively refurbished Grade A office space.

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