Avison Young: Scotland sees first signs of change in office occupier strategy
Strategic real estate advisor Avison Young has highlighted a change in office occupier strategy in Scotland in the first quarter of 2022 as it released its latest quarterly Big Nine office market update.
The Big Nine quarterly review shows the take-up in the major regional office occupier markets in the UK, including Edinburgh and Glasgow.
After a strong finish to 2021, activity in Edinburgh city centre slowed slightly with take-up amounting to 95,543 square foot (sq. ft) in Q1 2022. However, this equated to a 28 percent increase on Q1 2021 activity when the country was in lockdown.
Meanwhile in Glasgow, total take-up during Q1 2022 in the city centre was 82,270 sq ft - an increase of 34 percent on Q1 2021 activity.
City centre take-up amounted to 95,543 sq ft while out-of-town take-up amounted to 21,587 sq ft. This resulted in total take-up across Edinburgh of 117,130 sq ft for Q1 2022, an increase of over 28 percent on Q1 2021 take-up (91,400 sq ft).
A total of 40 transactions were completed in Q1 2022, which was nearly double (21 transactions) of those completed in Q1 2021, at the same time, only three deals during the quarter were for more than 10,000 sq ft.
The report indicated that 1 Haymarket Square continues to be a popular location, with the site seeing the largest deals of the quarter. The building has now been fully pre-let and opens later this year. At the same time, West Edinburgh is currently the only option for a zero-carbon building in the city
Peter Fraser, director at Avison Young Edinburgh, said: “While activity slowed in the capital after an extremely strong finish to 2021, the office market is in a much better place than this time last year.
“Interestingly, much of our previous predictions about a change in occupier strategy are now starting to bear out. While staff are on the way back to the office in ever-increasing numbers, we know from our conversations with many occupiers that the hybrid workplace is here to stay. A lot of businesses are beginning to downsize and provide greater weighting to the quality of the space to ensure staff are happy in their working environment, as we saw in the latest quarter where only three deals over 10,000 sq ft were completed. Facilities like wellness spaces and changing facilities have increased in importance, with the intention of making the office more of a destination rather than just a workspace.
“Options in the city centre continue to be limited, particularly for larger office requirements. This is driving increased occupier interest in West Edinburgh, where larger floor plates are available that can satisfy both space and ESG requirements. In fact, West Edinburgh now has at least two zero-carbon buildings available with more to follow.”
In Glasgow, city centre take-up amounted to 82,270 sq ft in Q1 2022, which equated to a 5% decrease from Q4 2021. Out of town take-up was 50,544 sq ft – down 32% on the previous quarter. However, total take-up for Q1 2022 equated to a 34%increase on Q1 2021 take-up (61,000 sq ft).
Activity in Q1 in the city was led by the professional services sector, which accounted for almost 90% of city centre take-up above 5,000 sq ft. The vacancy rate in Glasgow city centre has increased slightly since the previous quarter and now sits at 10.6%. Simultaneously, the majority of Glasgow’s development pipeline is let already, with only circa 100,000 sq. ft of new Grade A space still available
Alison Taylor, managing director of Avison Young Glasgow, said: “Whilst the shift to hybrid continues, we are finding employers are adjusting their business strategies to ensure they are able to offer staff the workplace of the future. The expansion of flexible space in the city is welcome given the number of smaller office requirements being witnessed at present. It’s important as a city that we can give fledging companies space to grow.
“At the same time, with the development pipeline eroding, the city is crying out for the next phase of speculative offices to satisfy those companies strategising for best-in-class space. Clearbell’s acquisition of 150 St Vincent St in December 2021 is not only a display of investor confidence in the city but will transition a 1970’s envelope into an inspiring new sustainable workspace of the future.“