Refurbished offices ‘soon to be the only option in Glasgow’ as strong take-up continues

Uncertain economic and political conditions and a possible influx of buildings suitable for refurbishment coming back on to the market in the next three years have been cited as reasons for the lack of potential development.

According to Savills research, Glasgow witnessed strong levels of office take-up in 2016, surpassing the 10-year annual average of 500,000 sq ft within the first three quarters (totalling 523,000 sq ft, a 26 per cent uplift on the same first three quarters of 2015) and a total of 800,000 sq ft of deals completed by the year end.

Keys deals include a 154,814 sq ft pre-let to Morgan Stanley at Bothwell Plaza, ACCA taking the remaining 55,744 sq ft of accommodation at 110 Queen Street, AXA moving to 49,424 sq ft in Cuprum and Edrington Group agreeing a new lease on 29,890 sq ft at 100 Queen Street. These strong take-up levels leave Glasgow’s Grade A office stock at a shrinking circa 400,000 sq ft, says Savills, of which only 130,899 sq ft is classed as ‘new’. With ongoing occupier demand from the likes of Mott Macdonald, Scottish Courts, Mazars, Wood Group and HMRC, who are actively looking for almost 400,000 sq ft in the city between them, Savills notes that these significant requirements alone could suggest a substantial supply / demand imbalance.

Savills also suggests up to 300,000 sq ft of offices suitable for refurbishment will come onto the market in 2017 alone. As a result of reduced new development, top Grade A office rents in Glasgow remained flat throughout 2016, according to the firm, at £30 per sq ft.

David Cobban, director in the business space team at Savills Scotland, said: “A possible wave of office accommodation coming back onto the market is incentivising landlords to complete deals on available office stock ahead of this, which despite the current lack of quality supply, is resulting in incentives moving out and headline rents remaining flat. A lack of new development is also having wider implications on Glasgow’s ability to attract inward investment which as a city we are currently struggling to do.”

Overall though Savills says Glasgow’s office market remains strong and despite wider political and economical factors, which both landlords and occupiers are conscious of, the firm refers to the latest figures from Oxford Economics that indicate a 3.1 per cent growth prediction in office based employment in the city over the next five years. This compares to -0.4 per cent in the previous five year cycle and is due, in part says Savills, to Glasgow’s growing information and tech sector.

David Cobban added: “Landlords with office space likely to come back onto the market should consider best in class refurbishments that are relevant to the needs of the occupier

and cater for the demand for ‘new’ space. Our What Worker’s Want research revealed 66 per cent of workers in Glasgow value the interior layout and design of the workplace as important, the highest number recorded in the UK, however only 19 per cent of employees feel that the layout and design of their current workplace increased their productivity. Addressing this downfall is a good place for Glasgow’s landlords to start.”