Savills report Edinburgh market fundamentals remain strong despite uncertainty
The UK regional office market will see rents remain stable despite lower levels of take-up due to the COVID-19 pandemic, according to a new report from Savills.
Savills says this can be attributed to record low vacancy rates, which at present average just 7.5 per cent across the Big-6 regional cities- Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.
The new research shows that Edinburgh currently has the lowest supply of available office space in core Scotland, and the second lowest supply within the “Big Six” regional office markets.
Current supply across the UK regions stands at 11.3 million sq ft, 44 per cent below 2009 levels. As a result, Savills predict the long term outlook for rental growth remains robust.
The report shows that historically Grade A rents are able to withstand downward pressure when the vacancy rate remains below 13 per cent.
Forecasts suggest that the Big-6 cities will remain under this threshold until at least 2023.
Mike Irvine, director in Savills office agency team in Edinburgh, said: “It was no surprise that Q2 take-up in Edinburgh city centre was significantly below average levels as the Covid-19 pandemic caused take-up across all major UK office markets to fall.
“However, we are confident that once a level of certainty returns to the UK economy, occupier activity in Edinburgh will resume to more normal levels. While we are likely to continue to see reduced levels of take up in the interim, we are of the view that rents on quality product will remain strong, given the constrained pipeline. There are currently a number of significant requirements in the market that we believe will underpin our view on rents.
“There has clearly been an essential shift to greater home working during the pandemic and this is something that is likely to remain part of many occupiers’ workplace strategies post-pandemic. Our view is that it is still far too early to be able to assess the true impact of homeworking on businesses and that making ‘knee-jerk’ reactions in terms of reducing operational property is ill-advised. The true impact of significant homeworking on business productivity may not be felt for several months or even years.”