Edinburgh office vacancy rates drop as demand for outstrips supply
Edinburgh’s office market has experienced a robust beginning to the year, driven primarily by the technology, media, and telecommunications (TMT) sector, despite facing significant macro-economic challenges, according to recent analysis from Knight Frank.
In the first quarter of 2023, the city’s office market witnessed a take-up of 90,872 sq ft, excluding regears. Although this figure is marginally lower than the previous year’s 100,856 sq ft, it has contributed to a reduced vacancy rate of 8.06% for all grades and less than 1% for Grade A spaces.
The TMT sector was responsible for the largest portion of take-up at 34%. Ofcom, the UK telecommunications regulator, signed the biggest deal of the first three months, securing 9,650 sq ft at Quartermile.
Energy companies, including Falck Renewables and Orsted, accounted for an additional 20% of the total take-up in the first quarter, each leasing 7,147 sq ft at 2 Lochrin Square. Knight Frank was involved in four of the quarter’s top five deals, representing 47% of the total take-up.
With space currently under offer at £42.50 per sq. ft. and 76% of the 370,000 sq. ft. of space scheduled for 2023 delivery already pre-let, Knight Frank predicted there will be further rental growth before the end of the year.
Simon Capaldi, office agency partner at Knight Frank Edinburgh, said: “The imbalance between the supply and demand of office space in Edinburgh is reaching chronic levels. While there is new space in the development pipeline, the vast majority of it has been pre-let and only refurbished product is available until later in 2024.
“In fact, much of the best quality space that is available is second hand and there is a real lack of Grade A building stock which can supply floor plates of less than 10,000 sq. ft., where much of the demand is coming from. This is putting pressure on quality stock in the city centre, which may push more occupiers to out-of-town locations.”
Mr Capaldi continued: “The flight to quality amongst occupiers that came about during the pandemic has intensified, with many now insisting on ESG credentials, wellbeing facilities, and prime amenities as part of their property needs.
“Occupiers are also increasingly looking for landlords to push forward with proposed refurbishment plans ahead of entry this year, with ‘plug and play’ office options also remaining in-demand.”