Research article

Unlocking the Capital Region’s potential

Upgrading road and rail links has the potential to boost economic performance and create new opportunities for industrial and residential development

The South Wales Metro is the cornerstone of the Cardiff Capital Region City Deal, and is indicative of how important getting the right infrastructure in place is to the future success of the region. In addition, the connectivity of the region has already improved with the removal of the tolls from the Severn crossings, although the projected increase of 6 million journeys per year could pose further challenges if the proposed M4 relief road is not delivered.

Demand for industrial space

The growth of the industrial market in the UK is well documented. South Wales has in the most part been sheltered from this increase in demand, however there are reasons to suggest that this situation will change. The most immediate structural change is the abolition of tolls from the Severn crossings, removing a significant cost within supply chains and will make locations in South Wales more attractive compared to the South West where rents are up to 30% higher.

Infrastructure investment both in and around Cardiff Airport has had a positive impact making it easier to access the Airport and move freight from there. The recently added Cardiff to Doha flight is projected to deliver 1,500 tonnes this year, up from just 5 tonnes the year before. With Cardiff Airport looking to secure more long haul flights this could make the region an attractive location for freight forwarding companies, but having modern facilities a road network that can handle the increased freight traffic will be critical.

Lastly the region is benefitting from an upturn in manufacturing with Aston Martin, TVR and train manufacturing company CAF locating in the region. Whilst these are positive investment in their own right, tier one suppliers to those businesses will look to locate in the region to deliver components.

Figure 3

Falling supply has resulted in low vacancy rates
Source: Savills Research

Rising rents

Take-up has risen by 10% over the last three years but the development market has not reacted. Vacancy rates are at an all-time low of 3.4% meaning occupiers will have to look to other markets to satisfy their requirements.

This has already been seen with DPD recently committed to a 60,000 sq. ft. pre-let at Pac Felindre where they will pay a rent in excess of £9 per sq. ft. Moving further east, a site is expected to come forward at Magor after Studwelders purchased 50 acres for their own occupation and to promote industrial and logistics development. Once infrastructure works are complete, this will be an attractive location for occupiers and highlights the need to bring forward sites closer to Cardiff.

With rents in South Wales set to rise by 3.1% a year by 2023, landlords and developers would be advised to consider speculative development of good quality industrial space or the refurbishment of second hand stock to bring it to modern standards. There are long term opportunities for site promotion around the proposed new road links.

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