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Activity defies referendum campaign

Edinburgh office market ‘strongest for ten years’

HaymarketThe office market in Edinburgh is at its strongest for a decade, defying predictions that the referendum campaign would depress activity, according to research by JLL.

Take-up of  875,000 sq ft of floorspace was 13% higher than the previous year’s 773,000 sq ft. The figure for last year is significantly above the five year average of 650,000 sq ft.

The final quarter of the year doubled over the previous quarter, while the pre-letting of 108,000 sq ft at 6 St Andrew Square to Standard Life Investments was the largest of its kinds in more than 10 years.

Financial Services drove a lot of the activity, but the city also benefited from the growing strength of the telecoms, media and technology sector which is expected to continue into 2015.

Three new offices developments began with others anticipated this year.

Major transactions included the letting of the 75,514 sq ft former home of The Scotsman in Holyrood Road to Rockstar; 26,600 sq ft to Codebase at Argyle House and 25,555 sq ft to The Scotsman for its new Head Office at Orchard Brae House on Queensferry Road. A further 20,600 sq ft was let to Zonal Data Retail Systems at Tanfield.

JLL was involved in 48% of all transactions across Edinburgh.

Predictions for 2015

Looking ahead to 2015, JLL predicts the following significant trends over the coming year that will shape the office occupier market:

1.       The lack of immediately available new Grade A supply has become more acute and we therefore anticipate further pre-letting activity. The vacancy rate for this type of accommodation is currently under 1%.

2.       The market is likely to be skewed in favour of landlords, especially in the city centre. As a result of current market dynamics, we will see rental growth whilst tenant incentives continue to decrease.

3.       We will see a ripple of occupier movement out to West Edinburgh over the next couple of years due to a shortage of supply in the city centre until new development completions come on stream during 2016.

4.       There are only three new developments currently under construction, 6 St Andrew Square which has already been pre-let, The Haymarket (pictured) and Quartermile 4, with the earliest due for completion in Q2 2016. These developments will deliver more sustainable offices which are capable of greater occupancy densities.

5.       Letting activity will centre around transportation hubs including Haymarket, Waverley and the re-emergence of Edinburgh Park. Quartermile has also now gained critical mass and a good tenant mix particularly attractive to the TMT sector.

Ben Reed, Regional Director at JLL said: “The levels of occupier activity during 2014 really underline the buoyancy of Edinburgh’s local economy, following several years of volatility.

“The final quarter, in particular, witnessed a significant increase in activity, with some indication that the figures were boosted by occupiers who were waiting until the outcome of the referendum before making property decisions.

“What’s clear going forward is that occupiers with lease events in the next two years will have far less choice than they have had for a number of years and therefore need to get advice and a strategy in place quickly.”

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