10 million sq ft of empty offices in Scotland
More than 10 million sq ft of office space now stands empty in Scotland as the work from home trend hits demand for commercial property.
Data disclosed to Daily Business reveals the extent of the office clearance phenomenon and follows our report this week that just one of Scotland’s business parks has more than half a million sq ft available.
Edinburgh Park alongside the city by-pass is festooned with ‘to let’ signs and ghostly car parks, indicating the extent of available space as workers and firms adjust to new work patterns and demand for higher grade offices.
Data compiled by CoStar, the commercial property analytics company, reveals that:
- The amount of vacant office space across Scotland has risen by 45% since the pandemic began and now stands above 10m sq ft with city centres and out-of-town business parks affected relatively equally.
- Glasgow city centre is the worst affected – 82% rise in vacant office space since March 2020 (vs 20% rise out-of-town)
- Edinburgh city centre has fared much better – 24% rise in vacant space since March 2020 (vs 73% rise out-of-town)
- Aberdeen vacant office space has risen by around a third since March 2020.
- The impact of the pandemic/shift to hybrid working on vacant office space in Aberdeen was actually less severe than the oil price crash of 2014-2016, which caused vacancy to quadruple as firms cut jobs and office space
- Vacancy rate in Aberdeen is highest in Scotland at 14%, though it is nearer 25% in the West End.
- Net absorption of office space across Scotland – a measure of demand that counts office space occupied as well as vacated (unlike take-up) – has been negative by 1.5m sq ft since the onset of Covid as firms closing or downsizing offices outweighed the square footage from new deals.
Office take-up in the capital in the second quarter totalled just 87,168 sq ft, down 45% from the same period in 2021 and 65% against the Q2 five-year average of 251,458 sq ft, according to CBRE.
More than 1.8m sq ft of office space is vacant across the city with current demand less than half that total (789,275 sq ft).
The general demand is for Grade A offices which meet requirements such as greater desk space, ventilation and bicycle storage. This coincides with some downsizing as firms respond to the work from home demands.
An ONS Business Insights and Conditions Survey, published earlier this week, reveals that 26% of firms with more than 250 workers in Scotland are using a hybrid model of working. This is consistent with 25.3% across the UK.
In some sectors, such as information and communication, nearly two-thirds of the workforce are spending only part of the week in the office.
The study analysed the responses of 8,912 businesses across the UK, including 1,140 in Scotland, of which 394 had more than 250 employees.
In addition to the quarter of staff working hybrid, a further 7.1% were working exclusively from home in large firms.
Shop vacancies ease
Indications of a flattening in shop vacancy rates have emerged in recent data from the Scottish Retail Consortium.
In the second quarter of 2022, the vacancy rate decreased slightly to 15.7%, from 15.8% in Q1. It was 0.4 percentage points lower than in the same point in 2021.
Retail Park vacancies again turned in the best performance, decreasing to 11.3% in Q2 2022, down from 12% in Q1.
High Street vacancies over the period fell to 14.7% from 14.8%, while shopping centre vacancies increased to 20.3% from 20.2%.
David Lonsdale, director, Scottish Retail Consortium, said: “The shop vacancy rate in Scotland saw a slender but nonetheless welcome improvement in the second quarter of this year.
“This was the first full trading period for over two years in which stores were able to remove all remaining Covid era restrictions.
“Encouragingly, this was the third successive quarterly improvement in the vacancy rate.”