High quarterly take-up in Glasgow commercial property despite Brexit fears

The property advisers’s Big Nine report reveals that city centre take-up was 161,527 sq ft compared to the five-year quarterly average of 147, 322 sq ft. This was helped by AXA Insurance moving from Atlantic Quay to take 50,000 sq ft at the Cuprum office scheme on Argyle Street in the city’s largest deal of the quarter.

Alison Taylor, director and head of business space in Scotland for Bilfinger GVA, said the Glasgow market held up well and saw a steady stream of deals concluded.

She said: “Like all regions, there is still a steady demand for Grade A energy efficient workspace in Glasgow and as well as the AXA Insurance deal, Regus took 29,000 sq ft in the city. These, along with a number of smaller deals, ensured it was a healthy quarter.

“There is no new speculative development currently coming through the pipeline in Glasgow. H2 has displayed healthy take-up levels in the city, above the 5-year average, following a similar pattern to the other regional cities. A shortage of good quality new Grade A stock seems certain to create conditions for rental growth, even allowing for any subdued demand whilst Brexit unravels.

“The market fundamentals for new development in Glasgow are persuasive with only circa 130,000 sq ft of never occupied space available. Any significant requirements would have a choice of maybe two to three properties at the most, including the remaining two floors at M&G’s 1 West Regent St or Abstract’s St Vincent Plaza. In the short term, some exceptional ongoing refurbishments such as CCLA’s 2-4 Blythswood Square and Epic’s recently completed 9 George Square may satisfy medium sized requirements under 25,000 sq ft but larger occupier requirements may have to look to re-gear and ‘make do and mend’, bucking the recent trend of occupiers moving to more efficient enhanced working environments for their staff.”

It was a different story in Edinburgh, with the quarterly take-up in the city centre at 105,139 sq ft, down 30 per cent on the five-year quarterly average.

Despite recording a lower take-up figure, we actually saw an increase in the number of deals over the past 3 months, the largest of which saw the Postcode Lottery acquire 33,000 sq ft in Charlotte Square. However,

Peter Fraser, associate director at Bilfinger GVA, identifies there is a potential issue looming due to limited availability of good office stock and a number of larger requirements which are likely to commit to space this year.

“Occupiers such as HMRC, GPU, and financial and professional services firms including EY, Brodies, State Street and Aberdeen Asset Management are understood to have large requirements, but with limited Grade A office stock, some of these occupiers will pre-let space at new developments. This will in turn eat into future supply levels, potentially increasing the pressure further on office availability in Central Edinburgh.

“These issues of ‘supply and demand’ are not lost on developers and the final phase of development is now underway at Quartermile, while GSS Developments have started construction at 2 Semple Street, with both expected to complete by Q4 2017 and Q1 2018 respectively. Construction is also expected at a number of other sites during the course of 2016 which should help rebalance stock levels but not until 2018.”