Office take-up robust...
Property market in Scots cities defies downturn
Commercial property activity in Edinburgh and Glasgow appears to be defying warnings of a downturn.
The Edinburgh market saw robust take-up in the three months ahead of the EU referendum, despite subdued market sentiment, according to analysis from Knight Frank.
Professional services and technology companies continued to dominate the market, accounting for about a third of occupancy.
Glasgow saw its best second quarter of office space take-up for almost a decade.
In total, 180,000 sq. ft. of space was let in Edinburgh centre, following a high number of lease renewals. This was largely in line with 2015’s performance, which turned out to be a record year.
The figures come amid warnings from the Royal Institution of Chartered Surveyors that the commercial property sector is facing a sharp downturn.
The strong take-up figure for the quarter puts further pressure on the availability of Grade A stock, with rents pushing higher and incentives diminishing on good quality offices in the core of Edinburgh city centre.
With few new schemes coming onto the market, there were also a number of transactions for large offices in the capital, which will be refurbished to Grade A standards.
Among these deals was Chris Stewart Group’s purchase of Blenheim House off London Road, which is expected to bring around 34,000 sq. ft. of new Grade A space to Edinburgh city centre by late 2017 or early 2018.
Toby Withall, office agency partner at Knight Frank in Edinburgh, said that deals continued to brew in the capital, which appear to be unaffected by Brexit.
He said: “The outlook for Edinburgh remains positive, despite the uncertainty hanging over the market following the EU referendum – several significant deals look likely to go ahead, which can only be a vote of confidence in the city. However, it’s still too early to say what Brexit’s full impact is likely to be.
“The fundamentals of the market remain strong and the lack of Grade A office space in Edinburgh city centre is pushing up rents – £33 per sq. ft., previously considered ‘super-prime’, was achieved in the city during Q2. As Grade A space continues to be squeezed, this is only likely to continue.
“There is little coming through on the supply side and demand remains steady – particularly from the burgeoning TMT sector. There are a healthy number of requirements being circulated, although this should be treated with a note of caution – a decent proportion of these are potential renewals for Q1 and Q2 2017.”
In Glasgow Knight Frank’s figures showed that 149,527 sq. ft. of office stock was let in during the period, the highest since 2007.
This also compared with 97,000 sq. ft. in the same three months last year (up 54%) and is marginally higher than the 147,000 sq. ft. let during Q2 2010.
This quarter’s activity was mainly driven by two large occupancy deals in the city, involving AXA Insurance at Glasgow’s Cuprum building and Regus at Tay House.