Demand for office space continues to outstrip supply in Glasgow and Edinburgh
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Property experts said the key theme of the post-pandemic period has been the demand for new grade-A developments, which continues to outstrip supply. This means the best properties are commanding a premium.
Releasing its “Big Nine” quarterly review, property advisor Avison Young said there was currently 655,000 square feet of development under construction in Glasgow, with 55 per cent of that space pre-let or pre-sold. Availability of stock has fallen by 14 per cent since the second quarter of the year with a 10 per cent decrease on the ten-year quarterly average. The firm, whose review examines take-up in the major regional office occupier markets in the UK, said grade-A availability stood at 89,000 sq ft, which makes up just 4.4 per cent of the stock currently on the market, though Glasgow has seen several refurbishments of grade-B space.
Paul Broad, principal and head of business space, Scotland, at Avison Young Glasgow, said: “Take-up in Glasgow remains low compared to pre-Covid levels, however prospective occupiers are looking to high specification offices. To accommodate such demand, we are seeing increased refurbishment and repositioning of grade-B space to grade-A. Some tenants are downsizing due to changing working patterns as more employers are offering flexible working arrangements for staff. Glasgow’s restricted development pipeline should go some way to supporting grade-A rents in the face of subdued take up of all new developments currently under construction in Glasgow.”
Although take-up is down on the previous quarter and remains low compared to pre-Covid levels, there have been some notable deals, the firm added. The largest within the Glasgow market was at 177 Bothwell Street for Evelyn Partners.
In Edinburgh, city centre availability is down by about a quarter on the ten-year quarterly average, while prime rents have reached £40 per sq ft. Haymarket Square, providing some 390,000 sq ft, is the only office development under construction and is fully pre-let. Avison said it was unlikely that Edinburgh will see any new city centre office completions for around three years, so the immediate focus is on full building refurbishments to deliver the stock that occupiers seek.
Peter Fraser, director, Avison Young in Edinburgh, said: “Edinburgh’s diverse tenant base supported take-up this quarter, which performed in line with average levels for the first time this year. While the availability of grade-A stock contracted this quarter, availability of secondary stock has expanded, moving outward by an average of 10 per cent per quarter over the past two years - if tenants want less space, they want the best space for the price.
“Tenants are willing to commit to excellent quality offices in city centre locations for long terms and at prime rents, but lack of prime stock within the city centre has led to some occupiers considering midtown or out-of-town business park destinations.”
A Savills study earlier this week revealed that Britain’s “big six” regional office markets, including Edinburgh and Glasgow, had recorded their best quarter for collective take-up this year so far.