The Welsh Government has entered the commercial property market by buying a Grade A office scheme from developer JR Smart at its Capital Quarter development.
Under the terms of the agreement, the 80,000 sq ft building, which is currently under construction, will be ready to welcome tenants in March. JR Smart will also start work immediately after completion on a new 75,000 sqsq ft office scheme.
The Welsh Government plans to bring contractors on site for a 100,000 sq ft building by the end of the year on land it bought at the Callaghan Square scheme from MEPC.
The only Grade A space currently available in Cardiff is located at 3 Assembly Square, which is part of Aviva’s Waterside scheme in the Bay. The property’s marketing agents are reporting strong interest in the property’s remaining two floors and are expecting that it will be fully let very soon.
This Grade A stock is vital if Cardiff is going to attract investment to its financial and professional services, as well as business looking to expand. Other factors, such as availability of a quality, skilled workforce, good transport infrastructure, and reliable broadband internet also play a role in whether a company will choose to set up or expand its operations in a given location.
The deal struck by the Welsh government with JR Smart, and its firm commitment to build at Callaghan Square, means that as of next spring there will be almost 260,000 sq ft of new Grade A office space built or under construction.
Subject to planning consent, Rightacres, a Cardiff-based developer, will be adding another 100,000 sq ft of office space on land it recently purchased close to Cardiff Central railway station. That would bring add approximately 400,000 sq ft into the local market, representing “some of the biggest speculative activity outside of London.”
Ideally, the office space would be provided by the private sector but since the global financial crisis, areas outside of London have experienced challenging market conditions.
Developers with deep pockets can afford to put up large amounts of capital to get projects off the ground, but smaller investors find it challenging to come up the with necessary funds that lenders require in terms of loan to value ratios. Cardiff must invest in new office stock now, and the government is stepping in to provide assistance.
A significant amount of the office stock will likely be pre-let, which will mitigate some of the risk for the venture. The Government will then have a reliable income stream from tenants and will be able to sell the building at a later date to get a return on its investment.
