Record rent achieved this year
‘Compelling’ dynamics in Glasgow office market
Take-up in Glasgow’s office market this year will reach 500,000 sq ft, in line with the 10 year average, but notably down on 2014 (664,000 sq ft).
This includes 150,000 sq ft currently under offer, expected to exchange or complete before the end of the year, according to international real estate advisor Savills.
Significant deals in the last 12 months include KPMG’s decision to take 39,000 sq ft at Abstract Securities’ scheme, St Vincent Plaza which saw the professional firm move to the fringe of the city’s office core.
Engineering professionals, WSP Parsons Brinckerhoff has taken the remaining seventh floor suite at 110 Queen Street, representing the highest headline rent to be achieved in Glasgow ever at circa £30 per sq ft (£323 per sq m).
David Cobban, director in the business space team at Savills in Glasgow, said: “With more than £1 million sq ft of demand in the market and three newly completed spec buildings offering circa 450,000 sq ft of space, office market dynamics are the most compelling they’ve been in 15 years as we witness a game of cat and mouse between occupier and landlord.
“Many occupiers entered the market early in 2015 in a bid to secure the best space and most competitive deals ahead of reducing incentives.
“However the preferred occupation dates of many tenants have not always aligned with the landlord’s required entry date resulting in delays in completions, reflected in this year’s take up performance. KPMG’s move to St Vincent Plaza is a bold move that signals a new direction for Glasgow as the prime office core moves further apart.”
Savills says existing Grade A supply in the city centre is currently circa 350,000 sq ft, including what remains available at 110 Queen Street, 1 West Regent Street and St Vincent Plaza and well below 10-year average take-up levels. The firm suggests this supply will drop to under 100,000 sq ft by the end of Q1 2016 due to the existing unfulfilled demand in the market.
Research shows rents for new Grade A space have moved on since January 2015 from £28.50 per sq ft (headline rents) to £30 per sq ft achieved at 110 Queen Street.
With no further new development until 2018 the firm says office supply will be provided by good quality refurbishments where rents are also likely to climb, from £22-23 per sq ft to £25-£27.50 per sq ft by 2018.
Savills concludes increasing construction costs and the significant headroom before rents reach parity with other key regional centres including Edinburgh and Manchester could mean further rental growth in the next development phase in 2018 to £32.50 per sq ft on the best located schemes.