Wales sees industrial and office rents climb amid supply crunch 2026

Key Points

• Occupier demand for commercial property in Wales was muted in Q2 2026, with a net balance of -7% reporting falls.
• Despite subdued demand, surveyors expect rents to rise over the next three months, with a net balance of 13% anticipating increases.
• Both office and industrial space are forecast to see rental growth, while retail rents are expected to fall.
• Investor demand fell flat at the all-sector level in Q2, though demand for industrial and retail space rose.
• Capital values are expected to rise in the industrial sector but decline in retail and office space.
• A shortage of Grade A floorspace across office and industrial markets is driving the need for rental increases.
• Prime industrial rents in Cardiff remained stable at £10.00 per sq ft in Q4 2025, with 2.6% annual growth.
• Average rental growth in Wales is forecast at 2.6% in 2026, with Cardiff at 2.7%.

Wales (Wales Times) July 29, 2026 – Industrial and office rents across Wales are expected to rise in the coming months despite muted occupier demand for commercial property in the second quarter of the year, according to the latest Royal Institution of Chartered Surveyors (RICS) commercial property monitor. As reported by business correspondents covering the Welsh commercial property market, a net balance of -7% of Welsh respondents reported a fall in overall occupier demand through the first quarter of the year, with negative sentiment continuing into Q2.

Looking at the subsectors, a net balance of -8% of respondents reported a fall in occupier demand for industrial space, while a net balance of -14% of Welsh surveyors reported a fall in occupier demand for retail space. For the second consecutive quarter, occupier demand for office space fell flat, according to the RICS data.

However, looking ahead, there appears to be some improvement in sentiment among market participants. Surveyors in Wales expect rents to rise over the next three months, with a net balance of 13% of respondents anticipating that rents will increase. Both office and industrial space are expected to see rises in rents, while rents in retail space are expected to fall over the next three months.

What do industry experts say about the Welsh commercial property market?

Chris Sutton of Sutton Consulting Limited in uk/local/cardiff/">Cardiff provided detailed commentary on the current market conditions. As reported by Sutton, “There is a lack of available Grade A floorspace across both office and industrial markets”. He noted that developers face challenges including funding, planning delays and increased construction costs.

Sutton added: “There are, however, high quality occupier enquiries in the Cardiff office market, and a recognition that rents will need to rise to improve viability”. In the industrial sector, developer Indurent has announced the final two phases of its landmark scheme in Newport, with quoting rents of £10-£12 per sq ft.

Commenting on the broader UK picture, RICS Head of Market Research and Analytics, Tarrant Parsons, said: “The UK commercial property market appears to have weathered the initial shock from the escalation in geopolitical tensions earlier in the year reasonably well, with the tone from respondents this quarter noticeably more settled than in Q1”.

Parsons continued: “Occupier fundamentals continue to hold up, and there is tentative evidence that the sharp tightening in credit conditions seen earlier in the year is starting to unwind”. He cautioned that “the pace of the recovery in investor sentiment remains modest, and respondents continue to flag caution given the wider macroeconomic backdrop”.

How are capital values and investor demand trending in Wales?

On the investor side of the market, demand fell flat at the all-sector level in Q2 2026, according to the RICS monitor. There was a fall in demand from investors for office space, however investor demand for both industrial and retail space rose through the second quarter of this year.

When it comes to capital values, respondents in Wales are more optimistic for the industrial sector which is expected to see its capital values rise over the next three-month period. However, capital values in both retail and office space are expected to decline, pointing to an overall flat picture.

Stuart Hogg of Stuart Hogg Property Consultants in Wales added further context: “Consumer confidence remains weak and inflationary pressures are affecting demand, whilst higher employment costs and tax increases are restricting growth and business confidence”. He noted that “property investors remain active seeking opportunities, but prime supply is low”.

What does the industrial market data reveal about Wales?

The latest LOGIC research from Knight Frank shows that the industrial and logistics market for units over 50,000 sq ft has demonstrated underlying resilience in the first half of 2026, with total take-up exceeding 600,000 sq ft and outperforming the 540,000 sq ft recorded at the same point last year. Activity in the second quarter reached approximately 270,000 sq ft across three transactions, comprising two sales and one letting.

Neil Francis, Partner at Knight Frank’s Cardiff Logistics & Industrial Agency, commented: “While we have seen a softer second quarter in terms of completed transactions, this is not a reflection of demand”. He explained that “there remains a significant volume of space under offer, but increased scrutiny and longer due diligence periods are undoubtedly slowing the pace at which deals are concluding”.

Prime industrial rents in Cardiff for units over 50,000 sq ft remained stable in Q4 2025, at £10.00 per sq ft, with prime rental growth of 2.6% recorded annually. Looking ahead, average rental growth in Wales is forecast at 2.6% in 2026, with Cardiff forecast at 2.7%, according to Knight Frank Insight.

Background of the commercial property development in Wales

The current commercial property market situation in Wales follows a period of significant volatility. In Q4 2025, occupier demand for commercial property in Wales fell sharply, with a net balance of -32% of Welsh respondents reporting a fall in overall occupier demand, which was the second lowest balance across all UK regions. At that time, surveyors in Wales expected rents to fall through the first quarter of 2026, with a net balance of -20% anticipating a decline.

The shift from expecting rental declines in early 2026 to anticipating rises by mid-2026 represents a notable turnaround in market sentiment. This change has been driven primarily by supply constraints rather than surging demand. The severe shortage of Grade A units across Wales has become increasingly acute, with South Wales having no new facilities over 50,000 sq ft available or under construction speculatively.

Vacancy rates for industrial units over 50,000 sq ft across Wales fell to 9.2% in Q4 2025, the lowest level since 2019, despite availability being dominated by poorer quality space. Out of 30 available units, just one is new and two are grade A secondhand, demonstrating that for new or high-quality units, the market remains highly supply constrained.

Predictions for how rental increases will affect businesses and investors in Wales

The expected rise in industrial and office rents across Wales will have varying implications for different market participants. For businesses seeking to occupy commercial space, particularly those requiring Grade A accommodation, the combination of limited supply and rising rents will likely increase occupancy costs significantly. As Chris Sutton noted, “rents will need to rise to improve viability” for new development, suggesting that occupiers will face higher costs as developers seek to make new projects financially feasible.

Small and medium-sized enterprises (SMEs) may face particular challenges, as the shortage of quality space at affordable rates could limit their expansion options or force them to accept lower-quality accommodation in secondary locations. The data showing that much of the available space is “poor-quality accommodation in secondary locations where redevelopment or higher-value uses are not viable” indicates that businesses may have to compromise on location or quality.

For investors, the outlook presents a more nuanced picture. The expectation that industrial capital values will rise while office and retail values decline suggests a continued divergence in sector performance. Tarrant Parsons of RICS noted that “the trajectory of interest rates, alongside developments on the international stage, will remain critical to whether or not positive momentum is allowed to build”.

The forecast of 2.6% average rental growth in Wales for 2026, with Cardiff at 2.7%, suggests moderate but steady returns for those holding industrial assets. However, the continued constraints on supply may limit transaction volumes, as evidenced by the 800,000 sq ft of space that was under offer in Q1 2026 but had yet to complete by Q2.