Demand for office space in Scotland’s three largest cities pushes take-up beyond 2m sq ft
A solid final quarter of occupational deals in Aberdeen and Glasgow, and an all time record year for Edinburgh saw take-up in Scotland’s offices market in 2017 reach 2.4 million sq ft, 14 per cent above the 10 year average, according to the latest Scottish Office Spotlight report from Savills.
Take-up for the full year in Aberdeen totalled 403,000 sq ft, 120 per cent above the level recorded during 2016 and the strongest year since 2014.
Unsurprisingly, says Savills, as the price of Brent Crude oil hovers just below $70 per barrel this boost in take-up has been witnessed most apparently in the Engineering and Extraction and Utilities sectors, which saw combined take-up reach 259,000 sq ft, 64 per cent of the total take up, up from only 17 per cent last year.
Simpson Buglass, head of the Aberdeen office and director in the business space agency team, said: “There remains a two tier market in Aberdeen, with landlords who have committed oil and gas operators into long RPI-linked leases and footloose occupiers who are able to take advantage of attractive rent free periods. Availability has now peaked in Aberdeen following the completion of Marischal Square (pictured, cover) and The Silver Fin Building during 2017.
With enquiries from the oil and gas sector gathering further momentum, footloose occupiers are being encouraged to act sooner rather than later. Grade C space will need to reinvent itself or continue to struggle for the foreseeable future.”
Significant lettings to the Department for Work and Pensions (DWP) and the Scottish Courts in Glasgow in the final quarter saw take-up reach 625,000 sq ft, 1 per cent above the five year average.
The city remains hampered by a lack of speculative development which, together with only 18 months of Grade A supply (425,000 sq ft) Savills suggests will lead to a wave of pre-lets being agreed in 2018 due to a number of lease events in 2020/21.
In Edinburgh (city centre and wider market) office take-up amounted to an all time record 1.1 million sq ft boosted by the ongoing growth of tech in the city. According to data from Stack Overflow, the Scottish capital saw a 19% increase in data scientists employed in the city centre over the course of 2017. Activity places further pressure on supply with only 220,000 sq ft of Grade A now available which Savills suggests will push top rents to £34 per sq ft in 2018.
Keith Dobson, director in the business space agency team at Savills in Edinburgh, said: “The soon to be completed 40,000 sq ft office scheme at 2 Semple Street will ease pent up demand come Q2 2018, whilst The Mint Building and Capital Square will complete in 2019 and 2020 respectively. However with such a modest development pipeline overall we need more speculative developments to be announced if we are to harness Edinburgh’s flourishing tech hub and support the wider occupational market.”