Will toll removal open commercial property floodgates?

20 November 2018

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At long last one of the major obstacles between Wales and England has been removed. For the first time, on 17th December 2018 the tolls on the Severn Bridge, renamed the Prince of Wales Bridge, became free for the passage of vehicles and, by association, businesses. Anticipation of the tolls removal has already fuelled a surge in demand for residential property on the Welsh side of the bridge around the Chepstrow, Caldicot and Newport areas, where some prices have moved by as much as 15%. There may be an even greater impact on the commercial property market, especially on office and industrial rental values.

At present, large scale logistics centres based at Western Approach Business Park, adjacent to the M49 on the English side of the estuary near Bristol, frequently secure rents between £6 and £7.50 per sq ft. If you drive that way, you cannot fail to notice the number of vast new distribution units under construction and nearing completion.

Equivalent buildings on the Welsh side rarely achieve more than £4 per sq ft. Business parks such as New House Farm and Gwent Euro Park near Newport have struggled to get much more than 50% of rent levels achieved just three miles away in England. However, it is fair to say that not everything is dictated by the tolls. Geographically, Bristol is well located for travelling north and south on the M5 and west and east on the M4. Soon though, with rents half the price only a couple of miles away across the free-to-use bridge, something is going to change.

Fore-running the decision to scrap the tolls was a rather prescient move by Amazon two years ago when it snapped up the St Modwen building in Newport Celtic West at a record rent of £5.50 per sq ft. Its occupation was soon followed by an equally ground-breaking sale of the investment to a pension fund.

Through the course of 2018, I was involved in negotiations on older buildings on the east side of Newport at Queensway Meadows, where rents have increased by 30% over three years. I am firmly of the opinion that these increases will be sustained over the next few years as Wales positions itself as a cost-effective alternative to the West Country.

The office sector is also likely to benefit, especially buildings located adjacent to the M4 at places like Langstone Business Park and Wales One near Magor. Office parks in Chepstow have already experienced an explosion in enquiries.

Retail is a slightly different beast. Bristol’s Cribbs Causeway is a popular shopping destination which may prove more attractive to consumers from South Wales once the tolls are removed. Newport and Cwmbran, which have been struggling in the rapidly evolving retail climate, could see a negative impact. Online shopping is of course fuelling demand in the logistics market for storage and distribution warehouse accommodation such as that at Western Approach.

We have danced around the issue of the M4 relief road for over 25 years. Now that the tolls have been removed at the stroke of a pen, we need action. There is huge potential for a South West / South Wales powerhouse to emerge which may rival the likes of Manchester and the South East. Can the political will match the vision?

Cooke & Arkwright advised ABP over the life cycle of its major waterfront mixed use development schemes in Cardiff and Barry. The quality and commitment of their people working alongside us were a key factor in the successful delivery of those schemes.

Byron Lewis, Estate Surveyor, Associated British Ports