Edinburgh office market ends year on a high fuelled by tech demand but supply concerns remain
Edinburgh’s office property market ended the year on a high fuelled by demand from the technology and professional sectors though “supply side challenges” could present a new year headache.
Releasing an update for the final quarter of 2021, property agency Cushman & Wakefield said 288,765 square feet of space was let, 42 per cent of the annual total of 683,906 sq ft, bringing take-up back to around 90 per cent of the ten-year average despite continued market disruption caused by the pandemic.
This was dominated by the city centre which accounted for 88 per cent of the annual total (90 per cent in the fourth quarter), with 49 per cent being of the highest quality Grade A space (67 per cent in Q4).
James Thomson, head of office agency for Cushman & Wakefield in Edinburgh, said: “The resurgence in Q4 and overall solid performance of 2021 is all the more remarkable following a pandemic constrained 2020, when take-up levels were only made respectable by the exceptional Baillie Gifford pre-let at the Haymarket Edinburgh development.”
The closing three months of 2021 saw a slew of deals at M&G and Qmile Group’s 1 Haymarket Square with 78,610 sq ft committed to Cairn Energy, which recently changed its name to Capricorn Energy, legal firm Shepherd and Wedderburn and audit and business advisory heavyweight Deloitte, with the remainder of the space reportedly under offer.
Vastint’s development at 2 Freer Street also succeeded in securing FanDuel/Flutter for the entire 59,350 sq ft.
In all, there were 39 transactions in the quarter with an average size of 7,500 sq ft, and a significant focus on quality with Grade A availability falling to 2.91 per cent of total stock by the year end.
Cushman & Wakefield said the most active sectors in Q4 were technology and professional services, reflecting the position across the year as a whole and “underlining Edinburgh’s transition to an increasingly diverse economy”.
Thomson said: “2021 saw an acceleration of leasing activity rather than the wholesale post-pandemic occupier contraction predicted by some. This was driven both by companies reviving 2019 requirements which had been put on hold, and by new activity.
“In both cases requirements are being reframed in the light of three strong drivers, being talent retention, post-covid ‘new normal’ working practices, and strong corporate ESG [environmental, social and governance] commitments.”
He cautioned over supply side challenges as the flurry of activity in the quarter had resulted in the majority of high-quality new city centre supply being committed.
“This will create challenges for occupiers, with no new city centre development completions now expected until 2023, and with the only new build completion in 2022 being Parabola’s net zero carbon development of 85,000 sq ft at 1 New Park Square, Edinburgh Park,” Thomson added.
“This year we expect to see demand levels sustained, while companies adapt their occupation to the new challenges they face. We have already seen a clear shift in the approach being taken by corporate occupiers, with demand consolidating around higher quality space.”