Ask, and you might be given
If you are looking for offices in Wales, it pays to probe on what deals, discounts and incentives may be available. Geoff Wright reports
Power has shifted as landlords and agents try to find ways of keeping a sluggish Welsh office market moving. Rents being squeezed, particularly for second-hand offices, and unheard of flexibility on leases is being offered. In many cases, the way to find the best deal is to ask, and keep asking.
Even though headline rents on top grade offices are being maintained across Wales, substantial incentives are being used behind the scenes.
The gap between prime and secondary space is widening with much of the second hand property becoming available – mostly in city centres – in need of refurbishment. Rents for lower quality space and even some business park units are down 25 per cent on average. “It is a difficult market with a shortage of prime property. Public sector cuts and rates on empty space are another hindrance,” says John Harper, policy director of the Royal Institution of Chartered Surveyors in Wales. “Many companies are consolidating and there are few new people in the market.”
In Swansea, Roger Poolman, of Lambert Smith Hampton, says the start of this year is looking a healthier. “Tenants are driving a hard bargain to get as much quality as they can and more flexibility, including shorter leases. The second-hand market is declining because the buildings are of inferior quality.”
The city’s business parks are the most sought-after locations, while enquiries from local companies are driving the market for offices of up to 5,000 sq ft. Decent space beyond central Swansea is at Crucible Park and Dragon 24 in Llanelli. Swansea’s SA1 project should keep attracting occupiers and developers and there is development potential at Swansea Vale and Velindre.
In Newport, it’s a good time for occupiers, says Robert Carew-Chaston, director at Hutchings and Thomas. While there is a fair amount of second-hand space, the city has grade A space at Celtic Springs Business Park, including the CS3000 building, on the western fringes. Headline rents for quality second hand space in the centre, such as Clarence House, are £11 per sq ft and the level of enquiries has been relatively strong for space up to 3,000 sq ft.
In some cases rents have softened, but many landlords are trying to keep their headline figure and offer more incentives. Potential occupiers are quoting market conditions as they look to pay low rent and gain maximum flexibility, including lease term breaks at three or five years.
Tenants have choice and, within reason, landlords are recognising this – that’s the verdict in North Wales where demand and availability has consolidated along the A55 corridor. The main A55 locations are St David’s Park at Ewloe, St Asaph Business Park and Parc Menai in Bangor, Colwyn Bay and a scheme emerging at Llandudno Junction on the former Hotpoint factory site, where Carlton is promoting space on bespoke design-and-build sale or lease options from 2,500 sq ft to 29,250.
“In all these locations, past development has generally catered for requirements of up to 5,000 sq ft with any larger developments either occupier built or developed pre-let for public sector end users,” says Gareth Williams of Gareth Williams Commercial Property in Rhyl. “In general terms, rents have reached up to £12.50 per sq ft, or £10 plus for modern space on the parks. Other than St David’s Park, which is influenced by the Chester economy, these levels continue to be quoted but there are deals to be done on flexible leases.”
Will Sadler, of North Wales agent Legat Owen, says landlords are also pragmatic about rents. “Occupier interest is good, mainly in leasehold due to lack of available finance,” he says. “Take-up at St Asaph Business Park and North Wales Business Park (Abergele) has been steady.”
The new medical campus at Abergele has sparked interest, he says, and tips the new Welsh Assembly Government headquarters at Llandudno Junction as a potential magnet for other occupiers.
Cardiff-based surveyor and consultant Robert Chapman says occupiers should find out what is negotiable and stand firm. He detects more confidentiality because people want to deal without being seen to be setting a precedent. “For the occupier, rent is not being looked on as dead money. Businesses should view property as a means to an end – space where they can grow and make profit.”
Incentives have been good for good-quality footloose tenants seeking to upgrade their office accommodation. John James of Fletcher Morgan says a lot of organisations have taken advantage.
Space is disappearing fast, says James: “There is still a limited supply of quality off space. However, it is dwindling and is not being replaced by speculative development. Office occupiers will need to act quickly as once the current quality stock has been exhausted developers will require realistic commercial terms to develop and fund future developments.”
