Record regears

Edinburgh firms ‘stay put’ as uncertainty lingers

20 Brandon Street
Former Standard Life offices in Brandon Street have been let to Blackrock

Edinburgh’s office market saw a record number of tenants choosing to sit out the economic uncertainty by renegotiate their lease rather than move to new premises.

Commercial property consultancy Knight Frank said a shortage of suitable space was also a factor in firm “staying put”.

It found that last year 493,315 sq ft  of office space was involved in “regears” – drawing up a new lease – a sharp increase on the 158,900 sq ft in 2021.

More than a quarter (28%) of these deals involved professional services firms, while another 23% was re-let to public sector organisations.

There was 548,727 sq ft of city centre office space taken up last year, slightly down on the 577,532 sq ft let during 2021. The 2022 figure was boosted by Blackrock securing 139,172 sq ft at 20 Brandon Street in the biggest deal of the fourth quarter.

Supply of new and refurbished space is expected to remain constricted, with all of the 110,000 sq ft that was scheduled to be delivered in 2022 pre-let and 76% of the 370,000 sq ft for 2023 already secured by occupiers.

Knight Frank predicted that the continuing supply-demand imbalance, and a vacancy rate of less than 1% for new-build Grade A space, could push Edinburgh’s headline rent north of £42.50 per sq. ft. early in 2023.

Toby Withall, office agency partner at Knight Frank Edinburgh, said: “Many occupiers have decided to stay where they are in the current uncertain economic climate, but take-up in Edinburgh has remained resilient.

“It is noteworthy that the predictions made during the pandemic of occupiers abandoning their office space altogether has failed to materialise – they still see offices as an integral part of their business plans.

“The flight to quality has continued and looks like becoming a permanent feature of the market. Many occupiers are now insisting on strong ESG credentials for their property and are placing high importance on wellbeing facilities and access to prime amenities.

“‘Plug and play’ office options also continue to be attractive to occupiers, allowing them to move in quickly without the hassle of large capital expenditure to fit-out the space.”

However, Mr Withall notes that the development pipeline remains limited for the next year or so and any additional activity will likely be influenced by cost inflation.

“While there are new-build projects set to be delivered, they have all been pre-let leaving only refurbished space available until well into 2024,” he said.

“Availability will be a challenge for the year ahead, with a particular lack of good quality, small to medium-sized Grade A suites.

“In turn, this could push rents higher for the best available space. Occupiers, therefore, need to plan ahead and act quickly if they want to secure the quality of space they are looking for, with some having to consider out-of-town accommodation.”

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.