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Cardiff | UK

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Despite the current Covid-related challenges, Cardiff is a future-focused city with an exciting story to tell. Offering fantastic quality of life, attracting increasing levels of inward investment, huge amounts of planned infrastructure spend and strong population growth projections. Opportunities lie in facilitating this future growth; there is currently an under supply of high quality city centre office space and the growing population will require additional housing. 

 

Office

Following several years of above trend performance, Covid-19 containment measures have restricted occupier activity in Cardiff and subsequently lowered leasing volumes. The year had begun brightly, with take-up of 64,364ft² registered in the first quarter. Q1 activity was focused out of town, with six deals outside the Central Business District (CBD) accounting for 70% of take-up during the quarter. The largest letting was to Target Group at Eastern Business Park, St Mellons, where the financial services advisor committed to a 12,300ft² refurbished suite. Availability has remained relatively stable in 2020 with Q3 Grade A supply at 191,651ft² and a city wide vacancy rate of 9%. Tenant release space has had a limited effect in 2020 as occupiers have continued to evaluate their occupational requirements but this is expected to increase as businesses implement future real estate strategy. Significant developments currently on site include the Interchange at Central Square prelet to Legal & General, the 107,000ft² first phase of John Street at Callaghan Square being speculatively developed by JR Smart and the refurbishment of Fidelity’s 1 Fusion Point providing 65,000ft² over 3 floors.

 

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As government restrictions took hold in the second quarter, activity reduced markedly as occupiers began to comprehend an enforced work from home policy. Starling Bank’s expansion at Brunel House was the largest deal recorded in a move that will see the firm double their footprint in Cardiff. The first signs of businesses looking beyond the Covid-19 crisis were evident in Q3. Enquiry levels improved and tenants began to formulate their strategy for reoccupation, transition from 100% work from home and plan for future property needs. Legal & General, as Landlord, have had success following their comprehensive refurbishment of Hodge House where Intelligent Ultrasound (7,188ft²) committed to two suites including the pre-fitted Capsule space along with Currency Cloud another new entrant to Cardiff that took to a new 10-year new lease of 6,587ft². There were 15 office deals in Cardiff in Q3 double the count from Q2. Take-up showed a moderate improvement with 42,718ft² leased as the wider economic challenges caused by Covid-19 continued to affect the office sector. To contextualise, total take-up for 2020 (Q1-Q3) has reached 138,213ft², a sharp reduction when compared to 287,009ft² at the same point in 2019.

 

Whilst the pandemic is continuing to have an effect on the overall performance of the office markets across the UK, the commitment of occupiers such as Starling Bank, Intelligent Ultrasound and Currency Cloud offer encouragement in Cardiff. These demonstrate both the opinion of the market on the future role of the office, as well as highlight how Cardiff continues to build a diverse and resilient occupier base. Despite very challenging conditions in 2020, forecasts indicate that take-up activity will rebound in 2021. The fundamentals of the Cardiff market remain balanced with a well-defined core, limited supply of Grade A space, controlled development pipeline and a competitive rental profile when compared to competing UK regional cities. Post-Covid, the high quality of living on offer in Cardiff, the vibrant mixed-used city centre environment and excellent connectivity will be of heightened importance in attracting businesses and staff back into the city centre.

 

Industrial

Despite the uncertainty of the past 12 months, demand for UK Industrial and Logistics space has continued to grow and has fared better than many other commercial property sectors. The forced shift to online deriving from Covid-19 containment has amplified e-commerce and led to rapid growth in demand for last mile / urban logistics. This has placed significant pressure on traditional logistics space in and around town centres. Whilst South Wales is not a main retail distribution market, this changing shift in shopping habits has gathered momentum locally and created new requirements for mid-size units. The lack of good quality stock has not only encouraged logistics operators to consider new build, but also more traditional industrial owners. It is interesting to note that national operators are not baulking at the higher headline rents required, as acquiring the right building in an optimum location is essential to their business.

 

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Development to date has been limited to distribution/last-mile logistic facilities with 50,000ft² developed at St Modwen Park, Newport, which was let to Amazon. St Modwen are currently on site speculatively developing a further 30,000 and 100,000ft² that will be available in 2021. Similarly, Trebor Developments are progressing the speculative development of 46,000ft² at Junction 35, Pencoed and last year Border Group completed the construction of 50,000ft² in Crumlin, Caerphilly that has since been let. In addition, development of smaller workshop and business units of up to 1,500ft² has been continuous. This type of development is typically built in phases and on sites of between 1 and 2 acres. The design and layout of the product, centres on occupiers who do not require large amount of circulation and deep loading yards. Local companies that want to own their own property is the main source of demand for this product and sustained demand is driving up capital values. Many developers though have chosen to retain an interest and units of this type have let well when offered to market. For example, in a development close to Junction 32, six units of between 1,000ft² and 1,500ft². were constructed. Five of the units let before practical completion.

 

Residential

The Residential market, like the majority of industries in the UK came to a sudden and grinding halt at the start of the first Covid-19 lock down. However once the Residential Market was unlocked in June, it has surged to new highs with intense activity across all price bands. The drive has been brought about by prospective buyers reassessing their needs, wants and aspirations which has led to this boom. The pandemic has helped focus people who may have been holding back on their plans for a variety of reasons, the likes of Brexit to name just one. Remote working, now a part of working life due to Covid, is enabling people to seek a better work life balance which can accommodate office and garden space within their Residential dream. As a result, Cardiff remained a property hotspot within South Wales, with an average house price of €309,297 (£264,474). This is well above the Welsh average of €219,114 (£187,361). Cardiff’s popularity as a place to live, combined with an increasing population in the 25-30-year old age group, has resulted in increased demand for housing of all types. The Cardiff Local Development Plan (LDP) was adopted in 2016 that identified several new housing allocations that will deliver approximately 41,000 new homes during the plan period up to 2026. Several of these sites are beginning to deliver new housing units, however most are providing traditional family housing due to the suburban environment, accessibility to good schools and other facilities.

 

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There is a current lack of new build accommodation under construction in the city centre. In recent years, sites that have become available have been largely taken up by developers of student accommodation due to the cost value equation. At present, there are only a handful of active schemes being undertaken by niche operators for open market flatted housing, these include Brickworks, Trade Street (Portabella), Bayscape, Cardiff Bay (The Marine Group), Schooner Wharf, Atlantic Wharf (Morganstone / Cardiff Community Housing Association). With regard to the Build to Rent (BTR) sector otherwise known as the Private Rented Sector (PRS) the proportion of people living in private rented accommodation in the city centre has almost tripled since 2001. The traditional residential property ‘for sale’ market in Cardiff has seen a steady rise in values over the past few years as evidence by the transactions achieving average sales value within the range of €392 (£335) per ft² to the target of in excess of €468 (£400) per ft².

 

Retail

The Covid-19 pandemic forced the temporary closure of non-essential retail stores across the UK in March 2020 and encouraged many shoppers to look at options for home delivery for both essential and non-essential items. The Welsh government imposed a further two-week lockdown in October / November and nonessential retail stores were ordered to close once again. The Office for National Statistics data for September, showed that, across the UK, non-store retailing sales volumes were 36.6% higher in September compared with February, as consumers continued to carry out much of their shopping online. More than a quarter (27.5%) of retail sales in the UK are now online, compared to 19.2% in 2019. The shift to online shopping has been more pronounced in Wales, compared with other regions of the UK. According to a recent YouGov survey, 39% of Welsh consumers are shopping more online than during lockdown. This compares to 27% in Northern Ireland, 32% in England or 36% in Scotland. In Wales, 79% of consumers had 1-3 packages delivered per week during lockdown compared to 69% of English consumers. The most purchased items across Wales during lockdown included home and garden items, followed by alcohol, as well as health, beauty and fragrances.

 

Although Welsh consumers are shopping more online, a recent survey for Visa (conducted in September 2020), found that 78% of shoppers in Cardiff are shopping with local small businesses as much or more since lockdown was lifted – both in person and online. There remains an interest in supporting local businesses and the local community even if customers are reluctant to shop in store. The shift in retail activity from in-store to online is impacting the amount of warehouse space required by retailers. We are already seeing rising demand for space from online retailers across the UK, seeking to expand their networks and capture a share in this growing market. In Cardiff and across the South Wales region, we are seeing rising demand from distribution companies for last mile and urban logistics and this is trend is set to continue.

 

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Analysis by Knight Frank Research shows that every £ billion of online sales requires approximately 1.36million ft² of warehouse space. Compared with other regions of the UK, the shift to online shopping has been even more evident in Wales and this could mean a significant uptick in demand for warehousing space in South Wales, particularly around Cardiff and along the M4 corridor. The South Wales warehousing market offers attractive pricing, relative to other regions of the UK. Despite being a relatively peripheral market, 66% of the UK population reachable within 4 hours HGV drive time (from junction 32 of the M4). Along with Cardiff, this encompasses major population centres including London, Bristol, Birmingham, Manchester and Liverpool. The removal of the Severn Bridge tolls has also helped boost demand in the region. Take up has been limited by a lack of new development and lower quality of stock. However, there has been a rise in development recently, including phase 2 of St. Modwen Park Newport. The development of high-quality industrial and warehouse space will be key to seizing the opportunity in online retail and logistics in order to encourage businesses to locate in South Wales and attracting investment and jobs to the region.

 

Sustianbility

Since 2005, Cardiff’s carbon emissions have reduced in the domestic sector by 38% and in the industrial and commercial sector by 55%. The Welsh Government are committed to the UK target for net carbon zero development by 2050 while Cardiff Council are aiming for 2030. As part of Cardiff Council’s “One Planet” strategy, tree canopy coverage will be increased by 25%, and historic canals in the city centre redeveloped as part of a sustainable water management scheme to avoid flooding. A new solar panel farm opens this month at the former Lamby Way landfill site, this will generate enough energy to power 2,900 homes for 35 years. The council is also planning a low-carbon heat network and would replace gas boilers in major buildings. Cardiff real estate is well positioned to take advantage of this trend. Cardiff developments have been awarded 130 BREEAM certificates, issued since 2008. More than half of these (68) were rated outstanding or excellent. Across all sectors, there are currently 25 schemes in progress across Cardiff that have been designated to achieve BREEAM ratings, 15 of which are designed to achieve Outstanding or Excellent ratings. The largest of these is an extension to Cardiff university post graduate research campus, due to complete in 2021. With Cardiff Council aiming for net carbon zero by 2030, then any purchaser of a new scheme will want it future-proofed to protect their exit values. This policy is promoting sustainable development in Cardiff and providing buildings that align with investor strategies.

 

Final 

Although additional Covid restrictions were put in place, the final quarter of 2020 exampled cautious activity. Office take-up was 166,810ft², the highest quarterly total of the year, whilst investment volumes reached €87.2m (£74.6m), double the 10-year quarterly average. While the temporary closure of non-essential retail stores hit hard on retail commercial estate. it prompted greater demand and hence a promising investment opportunity in logistics sector. Current lack of new build accommodation in the city centre in light of a population growth also suggests further acceleration in development activity in residential sector. 

For more information, please see:

The Cardiff Report 2020 by Knight Frank

UK Cities Cardiff Q4 2020 report by Knight Frank

 

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Planning permission sought for 600 apartments on former Irish Glass site

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Planning permission for 600 apartments on the former Irish Glass Bottle site near Ringsend in Dublin has been submitted by a consortium led by developer Johnny Ronan.

The consortium, which also includes the National Asset Management Agency (Nama), Oaketree Capital Management, and Lincor Developments, is expecting construction to commence on what is the first phase of Pembroke Quarter early next year.

The site was once a symbol of Celtic Tiger hubris after receivers appointed by Nama were appointed in 2012 after its respective owners ran into financial trouble. However, the vacant plot is now earmarked to become Dublin’s newest suburb, which once completed will deliver 3,800 homes, more than one million sq ft of commercial space, and educational facilities and other community amenities.

One quarter of the units developed at the site are to be allocated to social and affordable homes.

The property has been earmarked for development for some time with a company called Becbay, which was backed by developer Bernard McNamara, property financier Derek Quinlan, and State agency the Dublin Docklands Development Authority, having acquired the holding in 2006 for €412 million in an Anglo Irish Bank-backed deal.

Consortium

Mr Ronan’s Ronan Group Real Estate (RGRE), Oaktree Capital and Lincor were chosen as preferred bidders for a 80 per cent controlling stake in the former Irish Glass Bottle site last year after submitting a bid valued at in excess of €130 million. Nama has retained the remaining 20 per cent stake in the project.

Other shortlisted bidders for the controlling stake last year were: Sean Mulryan’s Ballymore Group; Dallas-based private equity giant Lone Star’s Quintain Ireland housebuilding unit; and Hines, a US real estate group.“This site that, for many years, has held so much unfulfilled potential to deliver housing in Dublin is finally being brought to life,” said Rory Williams, chief executive of RGRE.

“Over the coming years Pembroke Quarter will deliver much-needed homes for more than 10,000 people in Dublin’s city centre. We understand deeply how acute the need for housing is in the city, so we are very pleased to be able to submit this planning application for the first phase of development so quickly after the purchase of the site,” he added.

Nama chief executive Brendan McDonagh said: “We are delighted to see this superbly located Dublin Bay site move into the first phase of its development lifecycle with the submission of this first planning application for 600 residential units.”

He added that the 25 per cent allocated to social and affordable units would “provide homes to those most in need, close to the heart of Dublin”.

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New-build flats with communal work-from-home space are just the job 

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Whether it’s perching computers on ironing boards or struggling to find a peaceful corner in the chaos of a noisy family house, most of us have had to adapt our homes over the past 18 months.

But as the trend for flexible working looks set to continue, a new concept in housing is gaining traction.

Work from home (WFH) developments with a ‘hub’ shared by other residents are popping up across the country.

Modern living: Work from home developments with a 'hub' shared by other residents, which aim to retain the social aspect of office life, are popping up across the country

Modern living: Work from home developments with a ‘hub’ shared by other residents, which aim to retain the social aspect of office life, are popping up across the country

‘The hub is a way of retaining the social aspect of office life,’ says Karly Williams, director of Barratt North Thames. ‘Being close to home enables residents to manage domestic issues, while mixing with others staves off any sense of loneliness and alienation.’

At Barratt’s Linmere development in Houghton Regis, Bedfordshire, which is due to launch in December, the office hub will be surrounded by cafes, shops and green outdoor space.

WFH residents won’t feel they are missing out on the coffee breaks and sandwich lunches they used to enjoy as part of conventional office life. Barratt’s co-working offices and homes are priced from £101,000 to £439,500.

WFH developments can also be effective in regenerating rural areas where unemployment is a problem.

In the village of Lawrenny in the Pembrokeshire Coast National Park, planning permission has just been granted to a local farmer, David Lort-Phillips, to build a WFH development of 39 homes with shared offices. 

Lawrenny has been in steady decline since the 1980s and until recently looked like becoming little more than a cluster of holiday homes.

‘A village should be more than that; it should be a place to earn a living and to have a busy family life,’ says Lort-Phillips. ‘Many of the new WFH houses will be bought by people returning to Lawrenny, having been brought up here.

‘They will put back into the community, using local businesses and training up local young people.’

Prices of the new homes will range from £300,000 to £500,000 for two to four bedrooms, with management fees of £400 per annum.

One danger of building this kind of development in the countryside is that the new homes will jar architecturally with older, nearby properties. But this doesn’t have to be the case.

Galion Homes builds its developments in Somerset with home-workers in mind, so all the homes have offices with superfast broadband as well as nearby hubs and cafes.

‘We won’t be ugly “tack-ons” to villages,’ says Victoria Creber, sales director at Galion. ‘We build developments of no more than 50 homes, at low density, using local stone with a big nod to the local vernacular.’

Disturbing research, based on figures from the Office for National Statistics, was published recently showing 25 per cent of WFH Londoners said they had suffered reduced well-being.

Fizzy Living, which targets its rental apartments at young professionals with an average age of 32 and earning £44,000 a year, tries to make life as stress-free as possible in its East 16 block in Canning Town. 

The scheme comprises 292 apartments, each with its own balcony. Amenities include a meeting room, residents’ lounge, games area and yoga studio.

It claims to be the most pet-friendly building in London, having a specially designed dog washroom (known as the Pawder Room) and it offers a pet-friendly furniture pack for the more delinquent cats and dogs.

‘This block works for me because I can use different spaces for different activities and this combats stress,’ says designer Asher Peruscini, 37, from San Francisco.

‘I use my desk when I’m in design mode, the balcony for more creative stuff and the meeting rooms downstairs for socialising.’ Rentals are from £1,430 pcm.

For those who appreciate the zany side of life, Quintain Living has built The Robinson, a collection of three apartment blocks at Wembley Park in North-West London, in what its describes as ‘retro kitsch’ style.

Each building has a roof terrace where there are surreal delights such as a giant orange-shaped juice bar, a 50-yard row of sun loungers — reputedly the longest in Britain — and a slide that runs down to a courtyard in the floor below.

The WFH component isn’t forgotten — high-speed wifi is found in converted campervans on the terrace.

To de-stress, there is even a rentable spa caravan with a hot tub. From £1,755 furnished; £1,670 unfurnished.

Are WFH developments here to stay?

‘I don’t think working from home will ever replace the buzz of a team of people working towards one goal in the same office,’ says Harry Downes, managing director of Fizzy Living.

‘But I do foresee people being given the freedom to work at home when they need to, reporting into the office only to be kept updated on the bigger picture. It’s a new lifestyle and this type of development caters for it.’ 

On the market… with office space 

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South Africa 17 Lions 22

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15 Stuart Hogg

Something of a flip-flop in terms of his strengths as a player as one or two misplaced passes in attack but resolute and solid in defence. A couple of glimpses of his footwork and pace but he’ll be hoping for more ball next Saturday. Rating: 6

14 Anthony Watson

He was excellent in the first half, the Lions most potent force in attack in being able to escape multiple tacklers, albeit most of the time in lifting pressure in his own 22/half. The ball didn’t run his way after the interval. Rating: 7

13 Elliot Daly

It was his first game at outside centre in Test rugby in five years and it showed. He gave away a couple of penalties, missed his trademark long-range penalty, was bested physically in the collisions and will be under pressure to retain his place. Rating: 5

Robbie Henshaw is tackled by Elton Jantjies. Photograph: Dan Sheridan/Inpho
Robbie Henshaw is tackled by Elton Jantjies. Photograph: Dan Sheridan/Inpho

12 Robbie Henshaw

Shaded his physical duel with Damian de Allende, carried aggressively, was accurate in the tackle and scrambled well, highlighted by forcing a crucial knock-on from Lukhanyo Am. He made one fine break albeit losing possession and a couple of finger-tip knocks-on but generally good. Rating: 7

11 Duhan van der Merwe

A couple of snapshots of his power in the tackle but like Watson was never given the type of ball where he could impose his strength. He didn’t have many questions to answer in defence because Cheslin Kolbe got very little ball. Rating: 6

10 Dan Biggar

The Welsh outhalf kicked 14 points from the tee and in a general sense, one pulled place-kick aside, his kicking game was reasonably well directed. He didn’t really bring his backline into play at any stage, suffocated by the Boks’ defensive press but overall the ledger was appreciably positive. Rating: 7


The British & Irish Lions

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9 Ali Price

He looked a little overwhelmed by the pace and physicality in the first 20 minutes but he gradually settled to the task. It was his excellent box-kicking after the restart that yielded opportunities for the Lions to regain possession and wrest control. Rating: 7

1 Rory Sutherland

A late call-up to the starting team due to Wyn Jones’s unavailability he was pinged twice at the scrum and the fact that his replacement Mako Vunipola made an appreciable difference when introduced could see him struggle to be in the matchday 23 next Saturday. Rating: 5

2 Luke Cowan-Dickie

Two errant lineouts, one overthrown the other crooked, were the only real blemishes on his try-scoring performance that was accompanied by a high work-rate on both sides of the ball. Rating: 6

Tadhg Furlong appeals to referee Nic Berry during the first Test. Photograph: David Rogers/Getty Images
Tadhg Furlong appeals to referee Nic Berry during the first Test. Photograph: David Rogers/Getty Images

3 Tadhg Furlong

Loves a good celebration from the lineout maul tries, he won an important scrum penalty and was an important buffer in that set-piece when the Boks chased dominance there. He carried and tackled with typical application in a robust performance over the 67 minutes. Rating: 7

4 Maro Itoje

Deserved man-of-the-match, three turnovers in the first half alone including one within a few metres of the Lions’ line that saved a try. Immense in every facet of the game, he led by example especially in defence; intelligent and unrelenting. Rating: 9

5 Alun Wyn Jones (capt)

He was very quiet in the first half but considering the injury from which he has recovered that was to be expected. He was a key figure in the Lions’ second-half revival that included work-rate and decision-making. Rating: 7

6 Courtney Lawes

A huge performance in all aspects of the game, out of touch, carrying, making an eye-catching break that took him through three attempted tackles as a pre-cursor to one of his side’s better attacking moments. Tackled with authority. Rating: 8

7 Tom Curry

There could be no faulting his desire and work ethic but in conceding three penalties he demonstrated an impetuous streak that proved a bit of a handicap to his team in that opening half. His place will be under threat. Rating: 5

8 Jack Conan

He provided illustrations of the many qualities that he brings to a team, making one of two line breaks, defending and tackling with intelligence and carried the ball more than any other Lions player. Rating: 7

Replacements

In a collective sense they, to a man, added energy and momentum at a crucial stage. Mako Vunipola and Kyle Sinckler gave their team a rock solid scrum, forcing a penalty there to boot. Hamish Watson was lucky to avoid a card for a dangerous tackle. Conor Murray and Owen Farrell brought control and maturity for the most part. Rating: 8

Coach

Warren Gatland deserves great credit for the team selection initially as most of the big calls that he made work out superbly. His half-time recalibration of tactics and focus worked a treat as did the timing of the replacements. He’s never been afraid to change things up and that may be reflected in a couple of changes for the second Test one of which could see Bundee Aki drafted in at 12 with Henshaw moving to 13. Rating: 8

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