Research article

Joining up Cardiff’s city centre

There is huge potential for regeneration, and the focus should be on delivering a mix of uses

The focus of the city centre has moved in recent years, with the redevelopment of Central Square and the area surrounding the station, the office market has shifted southwards, but there is still a need to ensure that complementary uses are delivered and that the new centres are connected both with each other and the wider city.

Demand for office space

Cardiff’s office market is one constrained by limited supply. There is strong demand for Grade A space and a significant under-supply to meet this demand. This contributed to 2018’s fall in Grade A take-up to 180,000 sq. ft., 28% below the five year average. Refurbished space has helped fill this gap, resulting in rental growth of over 30% for best in class refurbishments.

Over the next three years, demand should be met by the delivery of over 400,000 sq. ft. of commercial space at Central Quay, John Street and the Interchange, of which around 50% will be speculatively developed. The city also needs to think about what type of space is needed to attract occupiers. Office take-up in Cardiff has historically been lease-event led and not reliant on big ticket inward investment. This is likely to continue in 2019 with most demand coming from existing occupiers within the city, so it is imperative that the city provides a mix of floor-plates to accommodate smaller occupiers as well as the large anchor tenants.

There is a strong start-up community in Cardiff with over 3,000 start-ups registered in the city

Savills Research

There is a strong start-up community in Cardiff with over 3,000 start-ups registered in the city. This is a 10% increase from 2015, highlighting the growth in Cardiff and the need for cheap, flexible space, suitable for rapidly evolving businesses. Notably, the media sector in Cardiff has seen real growth. BBC Cymru will shortly relocate to a new HQ in the city centre, taking 155,000 sq. ft. at Central Square.

This, coupled with the presence of other media outlets such as Bad Wolf, Boomerang, S4C, and ITV Wales in Cardiff Bay will act as a draw for media and tech businesses. The provision of more high-specification, serviced and flexible office space will be essential to the strength of this emerging sectors.

Repurposing retail

The city centre has several distinct retail zones that define their purpose, from the independents in the Arcades, high end retail on The Hayes and mass market retail in St David’s. Cardiff’s retail centre is more constrained than other major city centres and therefore is less impacted by significant tertiary space with poor quality retail. The retail void rate in the city centre is 15% (about average for cities of this size), but the void rate within the retail core is 9% (below average).

However, there are 70,000 sq. ft. of long term voids that need to be reconsidered for alternative uses. The extension of St David’s Centre over the last 10 years, has caused a shift in pitch for some of the pre-existing high street space, which now needs to look at alternate uses for upper floor retail space.

Looking ahead, property repurposing will be a key theme for Cardiff. Demand is good for smaller units, but voids within large boxes need more strategic consideration. For example, the House of Fraser unit on St Mary Street accounts for 1.72 acres of ground floor prime city centre frontage. The retailer is proposing to significantly reduce its own footprint, but far from leaving the retail pitch with a blight of vacancy, is instead presenting the landlord with a significant opportunity to provide something new.

Current proposals include a hotel and residential space, which will complement the retail and leisure offer while reducing the retail footprint of the city centre. Going forward we anticipate more repurposing, more city centre living, and more independents close to prime pitch.

Map 1

Cardiff City Centre and Bay
Source: Savills Research

The role of residential

Cardiff must offer the right blend of working environment, infrastructure and public amenity to attract occupiers to the city centre. Residential development will have a key role to play in this. Unlike other major UK cities, Cardiff hasn’t seen the resurgence of city centre living or the completion of purpose built rental stock, with only 23 new build sales in 2018 (3% of all new build sales) within 1km of Cardiff Central station. This is despite Cardiff having a high proportion of 20 to 35 year olds relative to the UK average, the demographic most likely to value city centre living.

However, purpose built rental schemes are beginning to come forward, with two currently in planning and a permitted scheme due to start on site in Q2 2019. This tenure offers a good alternative for investors who would have previously considered student accommodation, which, after several years of strong delivery, is already well supplied.

Encouragingly, there are plans for significant city centre residential development

Savills Research

Delivering residential in the city centre is also essential to supporting other uses, particularly retail and leisure. In turn, having high quality amenity provision makes the location more attractive to office occupiers.

Encouragingly, there are plans for significant city centre residential development, including over 2,000 units to be delivered through Vastint’s regeneration of the former industrial land at Dumballs Road. This will also play an important role in linking the commercial centre with Cardiff Bay; the site offers an opportunity to create a new pedestrian route along the riverside. The redevelopment should also link in to Canal Park and the new Arena site at Atlantic Wharf, increasing its role as a north-south link between the city and the bay and joining with the Eastern Bay Link road.

Although residential led, the Dumballs Road site will provide a mix of uses including workspace and retail. It is likely that a mixed use approach will be key to delivering residential in central Cardiff, as using retail and leisure as placemaking tools can increase the residential values and improve the scheme’s viability.

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