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Research the 2019 cardiff report
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2019
Matt Phillips' View
Investment
Industrial
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Offices
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key takeaways
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MATT
phillips'
view
Dynamic city,
big changes.
Q. Cardiff’s Profile has dramatically changed: what have been the drivers and what will be the challenges over the next five years?
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, not forgetting Cardiff’s Principality Stadium, are all examples of the ambition of Cardiff. Although progress is being achieved, a greater focus on delivery of a defined career path is essential in order to retain talent in the region and support the case for large organisations to locate their operations here. Integral will be embracing new growth sectors such as Artificial Intelligence, Cyber Security and other derivatives of technology, as well as areas of research and innovation such as Life Sciences. Cardiff is being recognised as a fantastic place to both live and work. The city must promote its attributes to the industries of tomorrow and dispel the perception of being a low cost option for back office functions.
A.
Q. What are the opportunities for the commercial property investor?
The reason why Cardiff is high on many global investors’ shopping lists is its ever-growing profile and quality of life offered. Cardiff regularly ranks as one of the top places to live. It has wonderful history, first-class higher education facilities, a burgeoning tourist industry and now it is rapidly becoming a significant technology, media and telecommunications (TMT) hub. Cardiff is growing rapidly and this growth will lead to exciting opportunities and, for those who make the right property investment choices in the city, returns ahead of the market average can be delivered. Our justification for this is that rental growth and tenant demand are anticipated to continue to grow across the city. 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. 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.
Q. Connectivity: how important is the delivery of the 'vision'?
It is of fundamental importance. Without the delivery of the comprehensive transport system, opportunities to grow the strategic employment areas will be hindered. Central and local government working with transport providers must take a holistic view and action to ensure the future vision of the city region is realised. Connectivity is not just about the physical (public transport) side, but also the digital and fibre optic capability which is crucial for the growing technology sector.
Q. How can Cardiff support the retention of talent?
Partnership is required between the city, educational authorities and industry. This will create an ecosystem whereby graduates are supported into work and a career path is clearly defined. This should not be exclusive to more established sectors such as financial and professional services, but must extend to the high growth sectors already mentioned. For the latter, consideration has to be given to the funding of these companies and how they occupy their incubator space.
Q. The City and the bay: How important is the delivery of rapid transport links
There is a need for the city core to extend to accommodate growth. It is time for the city and its Waterfront to be one. At present, these areas are perceived to be separate and lacking in direct links. The delivery of rapid transport links will ensure that the strength of the city is secured and the development opportunities, particularly the residential sector around the city’s waterfront, will have addressed one of the risk factors; namely connectivity.
ten year outlook
population
employment
entrepreneurs
earnings
retail sales
6.1
8.8
12.4
36.7
26.5
%
Population growth forecast.
Employment growth forecast. Employment in professional, scientific and tech jobs expected to grow 22.4%.
Number of Self-employment growth.
Average earnings growth.
Retail sales growth forecast.
Source: Oxford Economics
An investor’s view
Offices – The ‘Darling’ of Cardiff?
Investor opportunity to date, has mainly derived via new development. Aviva Investors sale of Cardiff Waterside to American investor Global Mutual for £84.5 million in 2018 is a good example. The scheme consisted of 400,000 sq ft of office space across seven buildings and crucially, two development sites with planning already in place for around 360,000 sq ft of office space. L&G has been an integral part of the development of Central Square with the final phase now agreed and to deliver a new bus station; 318 Build to Rent (BTR) apartments; and 100,000 sq ft of Grade A office space. L&G also agreed to forward fund the Department of Work and Pensions’ new HQ in Treforest to the tune of £52 million at a yield of 4%.
Other than offices
Whilst offices or mixed use schemes anchored by office space have proved appealing, opportunities for investment in other asset classes have been relatively scarce. In the UK, the main subject of investor interest has been for logistics and distribution property, but Cardiff and South Wales lack the geographic significance to attract ‘big box’ occupiers on the same scale as regions like the Midlands, hence sizeable investment deals have been few. Future demand is anticipated along the M4, and opportunities will therefore grow from servicing ’last mile delivery’. This means that units in close proximity to areas with a greater population density will become significant and sought after. Parcel carrier DPD is to build a 60,000 sq ft distribution centre at Parc Felindre in Swansea to expand its network.
What’s the Alternative?
Capital into alternatives is rising as investors search for yield. Cardiff’s large student population and their need for housing has attracted investment, with significant upgrades and additions to student housing stock over the past ten years. In July, Unite, the UK’s largest provider of purpose-built student accommodation (PBSA), proposed the acquisition of rival student housing provider Liberty Living for £1.4 billion. This deal is expected to close in Q4 2019, with assets in Cardiff worth approximately £253 million. This makes it the largest investment transaction of 2019. Cardiff also has a large population of young professionals, and existing housing stock is dominated by terraced houses (34% of Cardiff’s housing stock), while flats represent less than 30%. This compares to 37% in Bristol and Manchester and 32% in Birmingham (Source: VOA). The opportunity to create centrally located apartments and tap into the growing Build to Rent (BTR) market, has been seized upon by L&G with £400 million invested into Cardiff’s Central Square regeneration project. This will surely act as a catalyst for others. A high quality BTR pipeline has been established in Cardiff, prospecting on rising graduate retention rates and young professionals who will support an influx of city centre living.
A sustained period of reinvention has meant that investor attention towards Cardiff has grown. Cardiff has benefitted from an influx of public and private money which has supported regeneration. Each project has contributed to an improvement in the quality of the built environment and served to reinforce the competitive position of Cardiff. But does the Welsh capital now offer a product and growth potential to compete on the global stage for investor capital? Importantly, Cardiff’s employment base has strengthened. From an office occupier perspective, leading companies such as Admiral, Deloitte, Legal & General (L&G) and Hugh James are all major residents in the city. This strength of covenant has proved important. LaSalle Investment Management’s purchase of the Admiral HQ for £86.7 million in 2018 is demonstrative, with the deal representing a yield of 4.21%. The extremely low yield is consistent with pricing paid in central London.
What is the future opportunity?
Cardiff is seeing clustering from high growth sectors. Occupiers from technology, fintech, the creative industries, life sciences and advanced manufacturing are gaining prominence. Specifically, technology occupiers represented close to 15% of offices demand in 2018. Challenger banks Starling and and Monzo have taken space in Cardiff in 2019, along 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. 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.
“
technology occupiers represented close to 15%of offices demand in 2018”
cardiff investment volumes over the last 10 years
THE
Future of
does location and industry offer South Wales a unique opportunity?
structural change in retail, alongside the growth of high tech engineering and specialist manufacturing sectors, has meant a new demand dynamic has developed”
Historically, the growth of industrials in South Wales has stemmed from heavy industry and manufacturing. While both have been in decline in recent years, structural change in retail, alongside the growth of high tech engineering and specialist manufacturing sectors, has meant a new demand dynamic has developed. In addition, the film production industry in South Wales has experienced significant growth and this has resulted in new demand requirements with former manufacturing facilities being converted to film studios. Even so, the manufacturing sector remains a prominent source of demand with Aston Martin and most recently, Ineos, who have announced major new facilities in the area with an expectation that the region will benefit from increased demand from supply-chain companies. Cardiff’s location towards the western end of the UK’s major transport axis, the M4 motorway, has meant that it also competes against locations further to the east for major transport and distribution functions. Over the past ten years, take-up of distribution and storage space has risen, though not yet to the same scale as in the Midlands or North West. Nonetheless, Cardiff and South Wales are increasingly being considered as a suitable location to service the delivery of goods for both shop stock replenishment and customer order to wider geographies.
Why South Wales?
Foremost, land values are a low comparative to other major centres of the UK. Cardiff and the South Wales area benefit from fast road links to the Midlands, South West England and the M4 into London. Transportation costs from Cardiff to Bristol and other markets along the M4 corridor reduced following the removal of the Severn Bridge toll in 2018. Thus enhancing the cost incentive for operators to locate in the Cardiff/South East Wales region, and impacting on supply chains, warehouse location needs and rents. The Welsh Government has also invested £800 million in infrastructure upgrades to the Heads of the Valleys road, due to be completed by the end of the year. These improvements will open up the area to better access to and from the Midlands.
Growth trajectory ahead
Despite a large population of young adults and high levels of disposable income, Cardiff has a relatively immature online retail market in comparison to other cities, particularly when it comes to fashion goods. Fundamentally, Cardiff-based consumers prefer to buy in-store which, and it cannot be ignored, produces significant economic benefits to the city. But this is changing. Online pure-play retailer Amazon is the forerunner to steer Cardiff city centre shoppers towards their online platform. They recently opened a pop-up “Clicks and Mortar” store in St David’s Shopping Centre. The second to open in the UK, this offer local consumers the opportunity to touch, feel and connect with some of Amazon’s independent traders. These independent traders are central to Amazon’s growth model and this initiative aims to drive an increase in sales both online and in-store.
Online retail sales are predicted to increase across the UK, and Cardiff is no exception. Cardiff’s young and affluent urban population is growing rapidly and thus, online retail spend in Cardiff is expected to increase. A rise in online trade, coupled with the increasing expectations of consumers will lead to more demand for urban logistics facilities such as cross-docking warehouses and parcel carrier hubs across Cardiff and South East Wales. The influence of online retail trade will surely generate activity for industrial space with immediate access to the city centre.
15%
28%
44%
13%
Ten year take-up by sector
manufacturing
Distribution
other
retailing
Source: PMA
location,
location.
or is there more
to where you live?
Voted as one of the best places to live in the UK, how does Cardiff score?
Retail and Leisure
Cardiff has a large amount of town centre retail space compared with other UK cities, with 2.8 sq ft per person [5]. High levels of investment in Cardiff city centre and a number of redevelopment schemes are expected to boost Cardiff’s retail offering. Retail sales in Cardiff are expected to grow 26.5% over the next ten years [6], outperforming all UK cities with the exception of London and Manchester. As the Welsh capital, Cardiff has a large number of cultural and entertainment centres for a city of its size, such as the National Theatre Wales, the Wales Millennium Centre and the Principality Stadium. The cities' two main museums; National Museum Cardiff and St Fagans National History Museum, each attracted over half a million visitors in 2017. Few museums outside of London attract as many visitors. Cardiff hosts numerous cultural and sporting events. The National Eisteddfod of Wales attracted over 150,000 visitors and is considered to be the largest music and poetry festival in Europe. Cardiff’s Principality Stadium is a major hub for global events, the iconic venue is the second largest roofed stadium in the world. Besides being home to the Welsh Rugby Union, it hosted the UEFA 2017 Champions League Final, two world title boxing matches and a raft of music acts including Ed Sheeran, Beyoncé and the Rolling Stones. It will also host action sports festival, Nitro World Games in 2020. Cardiff's restaurants cater for all appetites across the entire budget spectrum and several restaurants have expanded into the Cardiff market recently. These include; The Ivy, Marco Pierre White Steakhouse, The Botanist and Honest Burger as well as James Sommerin in Penarth, a Michelin Star restaurant.
Affordability
The average house price in Cardiff in July 2019 was £208,558, below the national average of £232,710 [1]. The ratio of average house price to median gross annual earnings was 7.05 in 2018, compared to an average of 7.83 across England and Wales, and 12.25 in Greater London [2]. Cardiff is particularly attractive for renters. Asking rents in Cardiff averaged £731 per month (2018), this is below most other UK cities that we track, and below the UK average of £1,033 PCM. Rents in Cardiff are more than 60% lower than in Greater London [3]. Consumer prices (excluding rents) in Cardiff are lower than most other UK cities that we track and 22% lower than in London [4].
Access to green spaces
According to the Ordinance Survey, 8.0% of Cardiff’s inner city land area is publically accessible green space e.g. parks, gardens, playing fields etc. This is higher than Bristol, with 6.7%, but considerably lower than Birmingham which tops the table with 15.6%. The wider Cardiff area boasts over 330 parks and gardens and the suburbs to the north and west of the city centre also have an amount. Slightly further afield, the Brecon Beacons National Park is less than an hour drive and accessible via public transport.
Education
School selection and education is often an important factor to parents when considering relocating to a new city. Within Cardiff, there are two schools listed on the Good Schools Guide; Cardiff Sixth Form College and Howell’s School. Though the South Wales region has many more, including Llandaff Cathedral School, Christ College, Brecon, Crickhowell High School, Monmouth Girls and Boys Schools, Rougemont School, Newport and UWC Atlantic College, Cardiff High, Cowbridge in the Vale of Glamorgan. Cardiff and the South Wales region have excellent higher education facilities with three universities located in the city centre. Of these, Cardiff University ranks highly in the league tables, currently positioned 27th in the UK and 187th globally (according to the World University Rankings 2020). It is a member of the Russell Group and attracts students from around the world, with 25% being international students [7]. Knight Frank/UCAS research found in 2018 that over 45% of students studying in Cardiff intended to stay after their studies. Cardiff was the second highest UK City in the Global Rankings in 2018 for attracting and retaining talent, after London and ahead of Birmingham [8].
Physical connectivity
The average commute time for Cardiff residents is just 26 minutes [9]. This is one of the shortest average commute times across UK cities, those of a similar size have longer average commute times. Manchester, Birmingham and Bristol have average commute times of around 29-30 minutes. 20% of Cardiff commuters travel to work by foot or by bike, this is also relatively high compared to other UK cities. We expect the planned Cardiff “Crossrail” project to improve this further. Aiming to reduce car journeys within the city and improve air quality, the project will introduce new integrated public transport routes along with improved walkways and cycle routes. A new light rail/tram line will travel from east to west connecting major population centres and new suburbs in the west with Cardiff Central Train Station. An orbital light rail/tram route will link key residential neighbourhoods around the city to the network, and a single ticketing scheme will be introduced to allow easy modal interchanges. Work is due to start on the new Cardiff Parkway station, St Mellons, in 2020. The station is expected to be serviced by trains to Swansea, Bristol, London and Birmingham, as well as the South Wales Metro network and could also offer a suitable park and ride option for commuting into the city.
Digital Connectivity
In Q3 2019, the UK had an average download speed of 37.9 Mbps. Cardiff performs significantly better than average, with average speeds of 47.4 Mbps. Though this is behind some of the UK’s largest cities and major tech centres, it is comparable with Greater London (48.8 Mbps) [10]. Cardiff was one of the first UK cities to gain 5G mobile network coverage (through EE) and is expected to be available on the four major networks by the end of 2019, putting it ahead of all UK cities outside of London.
1. Source: Land Registry 2. Source: ONS 3. Source: Rightmove 4. Source: Numbeo 5. Source: CACI, PMA
6. Source: Oxford Economics 7. Source: HESA 8. Source: INSEAD 9. Source: ONS, Labour Force Survey, 2016 10. Source: ThinkBroadband
25% or higher of university students are from overseas."
Cardiff's restaurants cater for all appetites across the entire budget spectrum"
£208,558
7.05
60%
22%
avg house price in Cardiff in July 2019
ratio of avg house price to median gross annual earnings in 2018
Rents in Cardiff are more than 60% lower than in Greater London
Consumer prices in Cardiff are 22% lower than in London
o
e
appeal
Cardiff has undergone significant office development in recent years"
Workplace amenities have improved markedly over the past five years. As the attraction and retention of talent becomes critical, office occupiers now actively seek, rather than shun, buildings with ground floor retail and vibrancy. High-end coffee shops, together with an eclectic and exciting mix of, often independent, food and beverage facilities, have particular appeal and double as informal workspaces for many. Meanwhile, the rise of wellness as an employee concern and as part of the ‘war on talent,’ has seen access to gyms, cycle storage and well-serviced ‘end of trip’ facilities become de rigueur for a truly best-in-class workplace. Cardiff has undergone significant office development in recent years and witnessed the increasing role occupier’s HR departments are taking in real estate decision making. Developers have been responsive to this trend but how does the newly built stock of Cardiff truly align with the needs of the modern occupier?
But what's next? With the modern workforce more health conscious, places and spaces must support well-being and vitality. The broadening multi-generational workforce will mean that health related facilities such as drop-in surgeries, dentists and physiotherapy will add to this amenity agenda. Similarly, the need to create a closer relationship between learning, jobs and talent retention will become increasingly acute. Gaining favour amongst business leaders is the ‘grow your own’ approach to talent. Spaces dedicated to online learning and business and education initiatives are on the rise. The focus of businesses is shifting rapidly. Employee retention is entering a new phase and will redefine how space is used and the services being required.
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Connectivity
Electric
science
IT
Future Thinking
City Growth Potential
Global cities need to address both
Digital or
Physical
Connectivity?
People make approximately 1.5 million trips every day travelling to and from Cardiff"
Ease of movement of goods and people is a goal sought by every town or city. Physical connectivity creates new submarkets and opens access to employment and employees. Fundamentally, strong connectivity enables the whole region to function effectively as an economic entity. In Cardiff, this is often an area which is highlighted as needing attention. The city is the economic driver of a region of nearly 1.6 million people; half the population of Wales. Cardiff provides one third of regional employment. People make approximately 1.5 million trips every day travelling to and from Cardiff. New projects are in the pipeline to address this need, including the South Wales Metro and Cardiff Crossrail projects. These will support wider city aims to improve sustainability and reduce car journeys. Both are now particularly important given the shelving of plans for an M4 relief road around Newport. The Cardiff Capital Region (CCR) City Deal programme was established as a way of tackling connectivity issues and resourcing for the wider city region in a more holistic way. Agreed between the UK Government, the Welsh Government and the ten local authorities across South East Wales, the jointly funded programme costing £1.2 billion aims to bring 25,000 new jobs to the region, along with a further £4 billion private sector investment. With City Deal funds and European grants coming to an end, this programme is viewed as a key tool in advancing connectivity, promoting the region to an international audience and thus helping to secure the future economic health of Cardiff and the wider South East Wales region.
But will digital connectivity be equally important for a progressive city? As advances in technology, automation, artificial intelligence and big data become more influential on daily life, it is vital that Cardiff embraces these next wave technologies in order to facilitate the development of becoming a smart city. One strategic priority has been to enable public interaction with the environment whilst collecting real-time data. In 2017, Cardiff was the first European city to implement a smart parking system. Around 60,000 commuters arrive by car into the capital and such an app reduces congestion whilst improving air quality. Additionally, Cardiff has 14,000 LED lights around the city that enable a 50-60% reduction in energy consumption.
Strong connectivity can drive growth through regional collaboration. The city councils of Bristol, Newport and Cardiff have proposed such a scheme, although concrete plans have not yet been developed. But improvements, whether collaboratively or specifically directed at individual projects, will be required to compete with other cities. UK cities still lag behind market leaders however. In Singapore, the government has established an online platform known as ‘Virtual Singapore’, allowing the monitoring of public spaces, including smoking in prohibited zones, crowd density and cleanliness. Dubai has created an app allowing you to carry out multiple tasks, e.g. paying traffic fines, finding an ATM or tracking deliveries. Global cities are increasingly defined by their infrastructure. Digital connectivity is the next area of differentiation and one which will assist with broader objectives such as a sustainability agenda. Cardiff has made progress with a smart parking system. The implementation of a 5G network this year, will be significant and enable an integrated city system.
+
vehicles
driving a smart future for UK Cities
Given the government’s push for a zero-carbon UK and the announcement to ban the sale of all diesel and petrol cars by 2040, it is inevitable that electric vehicles will become viable alternatives to internal combustion engine vehicles. According to the Institute of Welsh Affairs and Go Ultra Low, of the 1.5 million registered cars in Wales only 2,500 were EVs, in 2017. Although a 35% rise from the previous year, this makes up just 0.019% of the UK’s 130,000 fleet. Electric vehicles therefore will need to rise on the Welsh Government's agenda in order to achieve aims for a zero emission bus, taxi and private hire fleet by 2028. One key aspect of a smart city is maintaining sustainability alongside pioneering advances in technology and how the two can be mutually reinforcing in enabling urban mobility. Charging infrastructure is a barrier to purchasing an electric vehicle. According to ZapMap, as of November 2019, Wales currently has 926 connectors, 3.3% of the UK total. This is the lowest when compared across all UK regions. This is a major hindrance as limited charging infrastructure curtails the adoption/switch to EVs by consumers as well as addressing ‘range anxiety’ and convenience for future and current users. Other challenges for Wales include a renewable energy infrastructure and strengthening the Grid to accommodate demand of electricity.
The Welsh Government has agreed to commit £2 million to facilitate an extensive electric car rapid charging infrastructure across Wales. This level of funding will encouragingly provide a catalyst for change as it is one of many policies laid out to achieve the first carbon budget (2016-2020) out of three teams, which aims to reach a 27% reduction in emissions by 2020. In addition, the Welsh National Assembly’s Economy, Infrastructure and Skills Committee have recommended all new homes in Wales have charge points in order to ensure demand does not outstrip supply. South Wales will be receiving an increase in charge points as five councils share £495,000 of UK government funding. They will be installed across 33 car parks and close to residential areas where people have limited availability, in Newport, Caerphilly, Monmouthshire, Blaenau Gwent and Torfaen. As a result, encouraging a shift towards greener infrastructure whilst enabling decarbonisation of the transport sector.
However, Cardiff and the rest of the UK, still lag behind other European countries with regards to incentivising the switch to EVs. For example, in Norway users are exempt from road and import tax and can park for free, as well as riding half price on ferries. In Austria, particular roads have lower speed limits for petrol and diesel cars compared to EVs, thus removing the financial burden off users. According to research carried out by the RAC for Motoring 2018, 55% of Welsh drivers would be willing to buy a zero-emissions vehicle, if financial incentives were increased.
55% of Welsh drivers would be willing to buy a zero emissions vehicle, if financial incentives were increased"
Capitalising
on science
in the city
Cardiff has a burgeoning life sciences scene. The sector, which properly defined includes medical technology, biopharma, outsourced providers and a broader ecosystem including academia and charitable organisations, is about to enter a period of explosive growth and transformation that will lead to the creation of new businesses, the restructuring of existing sector players, and increased volumes of demand for real estate. Cardiff has the potential to be a key beneficiary, in three key ways:
Old and new life science occupiers alike will be drawn to the specialist knowledge and talent being produced by Cardiff University, particularly as the sector seeks to invest heavily in fast-growth fields. For example, the investment in the new £70 million cancer research centre; the existence of one of only six dementia research centres nationally and the CUBRIC or brain research imaging centre, the largest of its kind in Europe, are all alluring to occupiers seeking to exploit opportunities in emerging areas of the sector. This will be further bolstered by the new biomedical and life sciences campus under construction within the University.
Cardiff can expect an injection of expansion-led demand from SMEs attracted to the city’s supportive start-up ecosystem. Once again, Cardiff University has been instrumental in this, with initiatives that provide links to other research-intensive universities, and a planned development of an innovation campus. This will be further turbo-charged by local government initiatives such as the continued work of the Cardiff-based Life Sciences Hub. This ecosystem is key given that the life sciences sector – contrary to popular belief – is dominated by SMEs, who make up 80% of UK life sciences businesses.
There is a major opportunity to build on Cardiff’s pre- existing strengths in medical technology. This will be supported by the Cardiff Regional Economic Growth Partnership who want to invest in and promote the medical devices and diagnostics sub-sectors. The global medical device market is growing rapidly and is projected to reach $595 billion in global sales by 2024.
Cardiff has a tremendous opportunity to capitalise on the opportunities emerging from a life sciences sector experiencing extreme and rapid transformation. Its existing sector strengths, the talent and specialisms generated by the university, and the growing support network presented by the city and its agencies, all have great appeal to occupiers within the sector. As the sector shifts from operating in specialist wet-labs to non-specialist dry-labs, occupiers will gravitate towards the high quality office environments emerging within the city.
Cardiff can expect an injection of expansion-led demand from SMEs attracted to the city’s supportive start-up ecosystem"
the it
crowd
Cardiff has been identified as one of the 13 fastest growing tech clusters, surpassing £1bn (£1.07bn) according to Tech Nation"
Coal and steel, once the backbone of Cardiff’s economy, has been gradually replaced by the growth of present-day industries. With technological advances, strength in academia and the need for economic development, Cardiff is recognising the need to diversify. Currently in the process of establishing itself as a thriving technology ecosystem, Cardiff has been identified as one of the 13 fastest growing tech clusters, surpassing £1 billion (£1.07bn) 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. Fundamental to supporting this, has been access to talent. Access to a strong pipeline of talent has posed a challenge to growth of Cardiff’s tech cluster. However, Knight Frank / UCAS research found in 2018 that over 45% of students studying in Cardiff intended to stay after their studies. Computer Science and Mathematics student numbers are rising at Cardiff University and the departments are developing new facilities. This will enhance research capabilities and innovation and ultimately foster opportunities for industry collaboration and drive further growth of the local tech cluster. The foundations are being cemented to encourage growth. From a funding perspective, the formation of the Development Bank of Wales has been important. Set up in 2001 by the Welsh Government, it has so far invested £600 million in local businesses and has attracted £900 million more from private investors. Its main priority is to provide financial support to companies ranging from £5,000- £5 million in loans and equity.
£100 million has been allocated over ten years to enable the establishment of the Tech Valley. With plans to be a globally recognised centre for technology, it will be located in the South Wales Valleys and is due to be completed by 2027. The positioning of office product and amenity within the Cardiff market will be integral in creating the right conditions to generate further growth. Amenity rich, flexible, service orientated real estate offer is a fundamental requirement. It is essential that schemes aligned to this are delivered to ensure that Cardiff secures high-growth occupiers.
As well as tech, Cardiff is also striving to be at the heart of the computer chip revolution forming the world’s first compound semiconductor cluster, CSConnected. It is one of 24 projects to have been awarded the Strength in Places Fund, which was established to benefit all nations and UK regions. With the only one being based in Wales, the university-led bid has an abundance of expertise on compound semiconductors. The cluster demonstrates strong collaboration, from industry key players such as IQE (HQ in Cardiff) and Newport Wafer Fab, expansion to factories, along with academic partners, policymakers and the Government’s £50 million Catapult Centre. Cardiff University has stated that the cluster could create 3,000 new jobs by 2025.
case study: Semi- Conductors
£100m has been allocated over 10 years to enable the establishment of the Tech Valley"
13
one of the 13 fastest growing tech clusters, surpassing £1bn (£1.07bn)
34
times increase in the demand for Python developers in the city
90
more than 90 digital firms have been established in the past 3 years
The 5 things you need to know about Cardiff’s changing profile
Next generation industry is key to continued growth in Cardiff
Cardiff’s profile has dramatically changed. The built environment has, and will continue to play a vital role in Cardiff’s progress. Already, the new, modern space on offer has served to bring high profile occupiers to the city. The next phase is to develop relationships and embrace the industries of tomorrow such as Artificial Intelligence, Cyber Security and other derivatives of technology. This goal is one in which Cardiff is already having some success.
Cardiff continues to offer opportunity for investors in all asset classes
Cardiff is high on many global investors’ shopping lists due to its growing attraction to large and international businesses. This growth will lead to exciting opportunities and potentially returns ahead of the market average. All asset classes are displaying areas of opportunity from the call of responding to ‘the last mile’ conundrum for industrials to addressing the changing preferences of residential use. Purchasers need to understand the city’s future vision and the medium to long term employment objectives.
Better transport connectivity could further transform the city
The delivery of the rapid transport link will support the growth potential of the city. Through better physical connectivity, Cardiff will be able to grow demographically and economically as new business communities develop. Extending the core and linking the waterfront area should be a priority and will mean that development opportunities will be enabled.
The ‘War for Talent’ remains a hot topic in Cardiff
Partnership is required between the city, educational authorities and industry. This will create an ecosystem whereby graduates are supported into work and a career path is clearly defined. Consideration has to be given to the funding and opportunities afforded to nurture growth industries.
creating modern office spaces with health, wellbeing and learning amenities will be key to THE future
As the attraction and retention of talent has become more acute, workplace amenity has become a strategic tool. Cardiff has undergone significant office development in recent years and have seen HR departments pivotal in real estate decision making. Developers have been responsive and amenity rich space the ‘norm’. But what next? With the modern workforce more health aware and career driven, employee focus is entering a new phase. Health, wellbeing and learning are the next areas of differentiation.
Self-employment growth.
287,000
107,00
office Take up in H1 2019
of Grade A OFFICE Availability
sq. ft
630,000
£m
87.9
Industrial Take up in H1 2019
2019 office investment volumes
office rents (£ per sq ft)
£26.00
£25.00
£24.00
£23.00
£22.00
£21.00
£20.00
£19.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
YTD
Industrial rents (£ per sq ft)
£8.00
£6.00
£4.00
£2.00
£0
<20k sq ft
20k-50k sq ft
70k sq ft +
prime yields (%)
10
9
8
7
6
5
4
3
2
1
0
2019 Q3
Cardiff Offices
UK Industrial 15 Year Income
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Cardiff Industrial
Matt Phillips
Partner, Office Head Cardiff Commercial
Gareth Lloyd
Partner, Capital Markets
Neil Francis
Partner, Industrial
Mark Sutton
Partner, Offices
Leah Mullin
Associate, Residential Development
Darren Mansfield
Partner, Commercial Research
Principal Contacts
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knightfrank.com
There’s a human element in the world of property that is too easily overlooked. At Knight Frank, we build long-term relationships that allow us to provide personalised, clear and considered advice on all areas of property in all key markets. We believe personal interaction is a crucial part of ensuring that every client is matched to the property that best suits their needs – be it commercial or residential. We provide a worldwide service that’s locally expert and globally connected. We believe inspired teams naturally provide excellent and dedicated client service. Therefore, we’ve created a workplace where opinions are respected, where everyone is invited to contribute to the success of our business and where they’re rewarded for excellence. And the result? Our people are more motivated, ensuring that your experience with us is the very best it can be. For a full list of our property services and how we can assist you, please visit:
