Lack of quality office space in Glasgow and Edinburgh creates upgrade opportunities for landlords

Research released today suggests that landlords in possession of sub-prime office space in either Edinburgh or Glasgow city centre could be sitting on a goldmine, due to the lack of high quality offices now available.

By refurbishing their office space to meet the demand, they could increase their rents by as much as 30 per cent.

Landlords able to refurbish and significantly upgrade sub-prime office properties to meet the demand for high quality space could see rents rising by as much as 30 per cent in Edinburgh and 20 per cent in Glasgow.

Aasia Mohammad, head of office advisory for Lambert Smith Hampton in Glasgow, said on the research: “Office space take-up in Scotland is around 40 per cent above the 10 year annual average, having been boosted by the pre-let activity in Glasgow. Whilst construction of new office space is underway, most is snapped up immediately which is leaving us with a shortfall.

The report also identifies that, across Scotland, just under 1,000 office property leases are about to come to an end before the end of 2020. With just under half of all lease events (44 per cent) in Scotland resulting in businesses wishing to relocate as a result and 28 per cent seeking to upgrade their workspace, the problem is set to grow.

Landlords are already starting to taking advantage of the situation, with 80 George Street in Edinburgh on track to increase its rents by 30 per cent, and 191 West George Street in Glasgow by 20 per cent, through successful refurbishment and positioning.

The demand is also fuelling property investment in both cities, with £637m of assets changing hands, a 92 per cent increase on the same period the year before, and the largest office investment deal in Scotland on record taking place with LCN Capital Partners’ £113m purchase of Aker Solution HQ in Aberdeen.

Ewen White, a director of capital markets at Lambert Smith Hampton, said: “There have been some really big investment deals this year which give a slightly skewed picture of the investment market in Scotland over the last twelve months. However, the fact remains that Scottish offices are sought-after assets for UK and overseas investors because they continue to offer good value for money and deliver good returns.”