JLL: Edinburgh and Glasgow office markets bounced back in 2021

JLL: Edinburgh and Glasgow office markets bounced back in 2021

Alasdair Humphrey

Edinburgh and Glasgow’s office markets recovered in 2021, as strong leasing volumes highlighted a return to near pre-pandemic occupancy levels, according to real estate services specialist JLL.

Documenting the growth of the office markets in the UK’s largest regional cities, JLL’s Big Six report shows that office leasing across the two cities surpassed 1.2 million sq ft by the end of 2021.

Edinburgh finished the year particularly strongly, with 296,200 sq ft in new transactions – its second-best quarter since Q3 2018 – pushing annual take up to 711,400 sq ft, down just 14% on the capital’s 10-year average. Grade A office space remained in high demand, with vacancy at just 1.1% by the end of the year. However, a surplus of Grade B and Grade C space pushed Edinburgh’s overall vacancy rate up to 5.2%.

The capital was buoyed by £320m of investment; a healthy level of performance that was in line with the 10-year average of £316m. The largest transaction in Q4 was CBREGI’s purchase of Exchange Place 1 for £59m.

Across the M8, Glasgow leasing volumes reached 496,700 sq ft in 2021, which comfortably exceeded the previous year but remained down on the 10-year average. Overall vacancy increased to 6.9% in Q4, although Grade A space remains scarce, with vacancy standing at just 1.8%.

Investment levels (£251m) were the highest seen since 2018 and only marginally below the 10-year average (£263m)

The UK Big Six report found that average leasing volumes across the UK grew by almost one million sq ft in 2021 but remained 11% below the 10-year average (4.6 million sq ft).

A strong second half to the year, as the nation began to adopt hybrid working, drove growth across the board with Leeds the only city to match its 10-year occupancy average (624,000 sq ft) by the end of 2021.

The ever-buoyant Manchester market saw the highest level of take up of the Big Six cities in 2021 and reached 1.1m sq ft.

There were 11 transactions in excess of 50,000 sq ft across the Big Six, with seven occurring in the second half of 2021. The largest deal was Roku’s leasing of 115,066 sq ft at the new build Circle Square in Manchester.

Alasdair Humphrey, head of JLL in Scotland, said: “The office markets of the Big Six act as an important barometer for the health of the regions, and these figures point to a positive post-Covid resurgence in Scotland which we’re seeing carry through from the second half of last year into 2022. There is strong momentum in the Edinburgh and Glasgow markets, which are now close to pre-pandemic occupancy levels. Real estate and infrastructure investment are at the centre of rebalancing the UK’s unequal economic geography, and surpassing pre-pandemic occupancy levels this year is likely to spell good news for local growth.”

Elaine Rossall, head of UK offices research at JLL, added: “We’ve seen a significant uptick in city footfall in recent weeks and, as firms look to facilitate more collaborative and attractive workspaces for their teams, we can expect new build space, especially those with a high sustainability, wellness and smart technology focus to set new standards across the Big Six. That said, we should be mindful of the gap between prime space and the rest widening, with occupants and the race to net zero necessitating investment across the board.”

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