Central Scotland sees surge in out-of-town office demand

Office take-up in Glasgow and Edinburgh’s out-of-town markets were well above the five-year quarterly average in the final quarter of 2016, according to new figures released today.

The latest Big Nine report compiled by commercial real estate advisory GVA reveals that out-of-town take-up in Edinburgh was 76,755 sq ft, up 39 per cent on the five-year quarterly average. The capital’s city centre take-up was 135,980 sq ft compared to a five-year quarterly average of 149,604 sq ft.

Key deals in Edinburgh in Q4 included 32,600 sq ft to EY at 144 Morrison Street and Bank of Montreal taking 13,000 sq ft at Quartermile 4.

There were also two deals at 1 Tanfield: a new letting of 21,500 sq ft to STMicroelectonics and a sub-lease of 12,200 sq ft to Zonal Retail Data Systems.

Peter Fraser, associate director for GVA, says demand continues to outstrip supply in Scotland’s capital: “In terms of supply, there is currently 343,000 sq ft of grade A space immediately available in Edinburgh city centre. Based on average grade A city centre take-up of 283,000 sq ft over the past ten years, this amounts to 1.4 years supply, albeit there are only four buildings capable of satisfying requirements in excess of 30,000 sq ft. Of the five schemes under construction, four remain available which will add a further 170,000 sq ft of grade A space over the next two years.

“In the pipeline, we expect most demand will come from financial, TMT and professional businesses and there is around 160,000 sq ft of grade A space rumoured to be under offer. In addition, it is understood the Government Property Unit is on the verge of confirming a preferred site for its 150,000 sq ft requirement.”

It was a similar story with take-up levels in Glasgow for Q4, 2016: an out-of-town total of 111,854 sq ft was 31% higher than the five-year quarterly average whereas city centre take-up was down 32 per cent on the five-year quarterly average at 101,194 sq ft.

During 2016, total take-up amounted to 1.9 million sq ft across the Edinburgh and Glasgow city centre and out of town markets. Glasgow performed slightly stronger over the year, with a total of just over 1 million sq ft against 786,000 sq ft for the capital. Other than Manchester, Glasgow was the best performing out-of-town market across the Big Nine cities and both Glasgow and Edinburgh performed well above average.

City centre-take up in Edinburgh ranked fourth amongst the Big Nine in Q4 behind Manchester, Bristol and Cardiff. Glasgow saw the sixth highest amount of activity, ahead of Newcastle, Birmingham and Liverpool. Headline rents in Edinburgh remained stable at £32 per sq ft in 2016, with Glasgow sitting at £30 per sq ft. During Q4, 2016 the largest out-of-town deal across the Big Nine cities completed in Glasgow, with Balfour Beatty occupying 43,560 sq ft at Maxim 7, Eurocentral.

Alison Taylor, director and head of business space in Scotland for GVA, expects 2017 to be a positive year for the city.

She said: “2017 is off to a good start with a couple of key large corporate lettings underway at St Vincent Plaza and a healthy level of enquiries and viewings during January across all size brackets.

“There is a constrained development pipeline and, with a spike in lease events in 2018/2019, occupiers should make early lease decisions. A small number of high quality refurbishments are underway across the city including 2-4 Blythswood Square (27,000 sq ft) which is completing late Spring and 100 Queen St Glasgow where Edrington recently took space and where another floor is now under offer. These refurbishments will fulfil those parties seeking high quality work space between 5,000 sq ft and 10,000 sq ft.”