When it comes to warehouse real estate in South Wales the area has a long history of being dominated by manufacturing and heavy industries. This tenant mix has often meant that developers of modern logistics buildings have traditionally left their aspirations at the border and concentrated their efforts in the areas around Bristol and the M4/M5 interchange.

However, with the removal of tolls on the Severn Bridge and the continued structural changes we are witnessing in the retail market, we expect an influx of interest in the South Wales industrial market as both occupiers and developers look to secure sites to bring forward future warehouse development.

Take-up in the region averages 700,000 sq ft a year and, while supply has risen recently to 1.8 million sq ft, all of the available units are second-hand and are of grade B & C quality. This is out of step with occupier requirements, indeed looking at data for the UK demonstrates that 69 per cent of the space transacted in 2019 was for grade A units.

Online retail fundamentally requires more warehouse space than traditional retail operations. This is due to the fact that retailers need to hold greater levels of inventory closer to population centres so that it can be delivered in a prompt fashion. Cardiff in particular has a young, well-connected population and it is forecast that by 2022 an additional £371 million will be spent online in the city alone. This will drive demand for modern grade A warehouse space; space that is simply not available at the current time.

However, it’s not just the shift to online retail that is driving demand for warehouse space in the region. In our cross-sector paper on the South Wales market, released in 2019, we identified that the region has a growing population which also requires warehouse space to service it.

In its 2019 report the British Property Federation (BPF) similarly identified, for the first time, the linkage between residential development and warehouse space. Each additional household needs 69 sq ft of warehouse space to support it. This comprises space to fulfil our parcel deliveries, online orders, the retail supply chain and the space to house the jobs needed to support the community.

Based on current housing forecasts and the BPF study South Wales needs a further 500,000 sq ft of warehouse space to be constructed by 2023, an ambitious target given there has been no speculative development of units over 100,000 sq ft for over a decade.

We believe a window of opportunity exists to capitalise on this predicted rise in demand for warehouse space as a new National Planning Framework is being implemented looking at strategic employment opportunities. Also local authorities such as Cardiff are identifying new industrial development strategies to bring forward development. Therefore it is ideal time for developers to deliver large scale schemes that the market clearly needs.

Further information

Read more: The industrial & logistics market in the South West