Swansea has emerged as a promising player in the UK’s office rental market, witnessing impressive growth in rental rates.
Driven by falling vacancy rates and limited new quality space, the city’s office market is thriving, with upcoming developments poised to attract even more businesses.
Impressive Rental Growth
Swansea has seen remarkable office rental growth, with average rents increasing by 2% over the past year. This strong performance is attributed to falling vacancy rates and a limited supply of new quality space. New developments are in the pipeline, promising more opportunities for businesses.
According to CoStar, Swansea is one of the few UK cities where the demand for office space has exceeded the space vacated in the last year. This trend has boosted the city’s net absorption, with occupied stock increasing by around 27,000 square feet.
Comparative Vacancy Rates
The city’s office market is relatively small, with approximately seven million square feet of stock, making it about a quarter the size of Cardiff’s market. Swansea’s vacancy rates are among the lowest in the UK at 3.5%, a record low, compared to Cardiff’s approaching 8%.
Over the past decade, Swansea has experienced a net negative delivery of office stock, meaning more office spaces have been demolished than constructed. This limited new space available and kept vacancy rates at historic lows.
Upcoming Developments
Swansea City Council’s Kingsway Digital Village project is nearing completion. The project, part of a larger infrastructure initiative, will deliver 100,000 square feet of new office space, the largest addition to the market in 15 years.
Additionally, the Princess Quarter renovation will bring 16,000 square feet of sustainable office space to Swansea’s city centre. Expected to command rents higher than £20 per square foot, this project aims to attract high-quality tenants.
By providing new, attractive office spaces, these projects are set to test Swansea’s ability to draw in new private sector tenants and achieve higher rental values.
Current Rental Market
Currently, the headline rent for office space in Swansea stands at around £15 per square foot, with aspirations for new grade A stock to push rents towards £20 per square foot and beyond. The city’s average office rent is approximately £12 per square foot, while Cardiff’s average is slightly over £14.50, with a headline rent of £25.
According to a CoStar spokesperson, “Demand for new, sustainable offices is becoming increasingly prevalent in the UK’s office markets as businesses seek spaces that comply with future ESG regulations and attract top talent.”
Leasing Activity
Despite the growth in demand, Swansea is not a high-volume leasing market. In the past decade, only three deals exceeding 50,000 square feet have been completed.
Notably, in the past 12 months, there has been only one significant deal: construction company Andrew Scott’s acquisition of a 10,700 square feet office building at Enterprise Business Park for £650,000. This highlights the need for more substantial leasing activities.
Future Prospects
The introduction of new office space in Swansea’s central business district this year is expected to attract local businesses aiming to secure a long-term presence in the city.
Businesses with upcoming lease expiries might need to act swiftly, as there is currently no new space in the development pipeline beyond this year, limiting future options.
Conclusion
Swansea’s office rental market is showing robust growth, with significant new developments on the horizon.
For businesses looking for new opportunities, Swansea presents an attractive option with competitive rents and burgeoning new office spaces.
Swansea’s office rental market is on an upward trajectory, bolstered by new developments and strong demand.
The city offers competitive rental rates and a limited vacancy, making it an appealing destination for businesses seeking new office space.