CBRE: Edinburgh sees ‘record low’ number of office take up deals
Edinburgh saw a record low number of office take-up deals in the second quarter of this year as the coronavirus pandemic heavily impacted the sector, according to the latest office market figures from CBRE.
Over the second quarter of the year, office take-up in Edinburgh totalled 26,876 sq ft, an 84% drop from the same period in 2019. This brings the take-up total for the first half of 2020 to 157,506 sq ft, which is 57% down on the first six months of 2019 and a further 68% down against the five-year average of 488,218 sq ft.
With COVID-19 having a huge impact on both the volume and size of lettings transactions, the quarter witnessed a record low number of deals with just eleven completing between April and June.
However, there were also nine lease re-gears comprising just over 53,000 sq ft. The largest deal was at Leven House, Edinburgh Park where Computercentre took just under 6,000 sq ft of space. There were also notable deals at Heriot Watt Research Park, with Celestia Technologies taking space at both Quantum Court and Discovery Drive.
In terms of supply, 1,609,237 sq ft of office space is available in Edinburgh. This represents an 8% rise from the previous quarter’s supply figure and a 21% increase in the year-on-year supply figure. Crucially, however, city centre supply remains low at 749,770 sq ft and new Grade A city centre stock is still at a premium with only 271,221 sq ft available.
The global health pandemic has also pushed back completion dates on new office developments within Edinburgh, such as Capital Square and New Fountainbridge, further tightening the squeeze on city centre Grade A supply.
Take-up for the Glasgow office market totalled 61,305 sq ft during the second quarter of 2020, a 67% drop from the same period in 2019 and 69% down on the Q2 five-year average of 194,429 sq ft.
This brings the total take-up for the first half of the year to 256,573 sq ft, which is 17% down on the first six months of 2019 and a further 35% down against the five-year average of 397,125 sq ft.
Key deals included the University of Glasgow acquiring just over 30,000 sq ft at Berkeley Square and serviced office provider Orega leasing 14,000 sq ft at 220 St Vincent Street. Meanwhile, the out of town market has seen Maxim Park at Eurocentral secure two large high profile lettings with Aviva and LumiraDx acquiring a combined 60,000 sq ft.
Total supply within the city now sits at 1,642,346 sq ft, representing a 1% rise from the year-on-year figure. Available Grade A office stock remains critically low in Glasgow, with just 11,509 sq ft of new office space available within the city. The pandemic has also delayed completion of new office developments within Glasgow, with construction at the likes of Atlantic Square and 177 Bothwell Street having to pause temporarily, further tightening the squeeze on city centre Grade A supply.
In Aberdeen, office take-up totalled 32,847 sq ft, a drop of 69% from the same period in 2019. This brings the take-up total for the first half of the year to 211,293 sq ft, which is encouragingly still 42% up on the first six months of 2019 and a further 5.5% up against the five-year average of 192,630 sq ft.
As was the same with Edinburgh and Glasgow, the quarter witnessed a record low number of deals with just eight transacting in the second quarter. Deals included a 16,212 sq ft letting for Expro at Kirkhill House in Aberdeen Business Park, Dyce plus 6,079 sq ft on the 8th floor at The Silver Fin Building.
Supply in the city currently sits at 2,497,981 sq ft, down 11.6% from the first half of 2019.
Stewart Taylor, head of CBRE’s Scottish office agency business, commented: “The offices sector, along with every other sector, has not emerged unscathed from the COVID-19 pandemic. The figures are unsurprising, particularly as buildings couldn’t be viewed or surveyed. If anything, activity was actually better than expected. What has been encouraging is that despite an industry-wide debate on how we will work in the future, occupiers have continued to progress acquisitions and the last three weeks have seen a marked increase in the speed at which negotiations and deals are progressing.
“While offices in the future may look different and may be smaller than anticipated at the start of 2020, the desire to have an office base remains and in fact much of what we’re seeing is simply an acceleration of trends that were already occurring - a flight to the best quality space with the best wellness credentials.
“With the delay in the completion of new buildings, the critical shortage of new space in Edinburgh and Glasgow has simply been exacerbated. This, coupled with positive employment forecasts for the regions, means we don’t foresee any impact on headline rental levels.”
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