Pandemic triggers 'flight to quality' in Edinburgh office market but supply remains tight
The pandemic has accelerated a “flight to quality” in the Edinburgh office market but suitable space remains in short supply, a new report reveals.
More than half of the office space transacted in the city centre during the Covid-19 crisis has been top-level Grade A, with larger occupiers vying for the best available stock, according to analysis from property consultancy Knight Frank.
The firm found that 56 per cent of the office space let since November 2020 - when it was announced that the first vaccine had been developed by Pfizer and BioNTech - was Grade A standard, compared to 21 per cent Grade B and 23 per cent Grade C.
Knight Frank said that the figures backed up the view that occupiers were taking a so-called flight to quality with their office requirements - characterised by organisations looking to secure the best space available - to support corporate social responsibility aims and retain and attract talent.
Technology, media and telecommunications (TMT) companies accounted for nearly a quarter of office take-up in Edinburgh during that time, followed by the finance and professional services sectors which accounted for 12 per cent and 11 per cent of take-up respectively.
The findings follow recent research from Knight Frank highlighting the fact that all the new-build space set to complete in the Scottish capital during the next two years has already been pre-let.
However, the firm also said that more than 230,000 square feet of major refurbishment projects are set to be completed over the next two to three years and smaller occupiers are increasingly looking for flexibility in lease terms.
Toby Withall, a partner at Knight Frank Edinburgh, said: “When the dust began to settle from the immediate impact of the pandemic and business started to get underway again, it became clear that the way occupiers thought about their property needs changed. Many began looking at it as a strategic tool for attracting new talent and retaining existing teams, while also supporting their wider ESG - environmental, social and corporate governance - goals.
“We have seen that play out in Edinburgh in the type of space that larger occupiers are looking for: high quality space with strong sustainability features and a focus on staff wellness, supported by access to a wide range of nearby amenities.
“These are particularly relevant to the tech sector, which has accounted for the largest share of take-up of any sector in the city since the pandemic began - but they are also increasingly prioritised by professional services, the finance sector and many others.”
He added: “With space matching that profile at a premium, there are other options for occupiers to consider, much of which can offer greater flexibility for smaller businesses - another key trend fuelled by the pandemic.
“Refurbishments can enhance the sustainability of older stock to accredited levels and, therefore, could be particularly well placed to absorb the demand from occupiers for functional space in which they can grow and contract as they require.
“Nevertheless, for occupiers of all sizes, all of this underlines the importance of acting quickly to secure the best office accommodation.”