According to commercial property consultancy CBRE Scotland, the Edinburgh office market is predicted to undergo a period of transformation for the remainder of the year.
Following the record year of take-up in 2017, characterised by numerous large deals and the acquisition of whole buildings, occupational activity retreated back to be focused on the sub 10,000 sq ft market in the first quarter of 2018.
Take-up in Q1 totalled 139,969 sq ft, all of which involved secondhand space. The largest single deal so far this year was just over 23,500 sq ft, in the out-of-town market.
Stewart Taylor, senior director in CBRE’s Advisory & Transaction Services, commented: “Despite the lower level of year-on-year take-up in the first quarter, the trend to pre-let will continue and due to the very low level of city centre supply, we are likely to see more below the radar transactions and more non-disclosure agreements signed as occupiers attempt to secure the best space without getting into a bidding war.”
In spite of lower levels of take-up, availability still continues to decline. By the end of March, availability stood at 1.07 million sq ft, down by just over 4% since the end of 2017, and a decline of over 14% over the previous twelve months.
With continued low levels of supply, prime office rents have continued to push higher. By the end of Q1 deals were in negotiation on new build space at £33.50 per sq ft.
Stewart continued: “Edinburgh is facing a real supply challenge and it’s not a short term issue. There are fewer development opportunities than at any point over my two decades of working in the city. The City of Edinburgh Council must be innovative and prepared to challenge long standing conventions over things such as height and the protection of commercial space to safeguard the city’s economic potential.
“Construction of The Haymarket development will commence and complete quickly. Its status and the market conditions are at last in tune and we will see significant office pre-lets.
“Like many UK cities, Edinburgh has witnessed sustained and healthy demand from the Creative Industries sector accounting for an average of 19% of take-up since 2010. This rivals the Banking & Finance sector in the city, traditionally seen as Edinburgh’s dominant sector. It is the Creative Industries sector though that has the potential to add greatest further growth to the city with Edinburgh demonstrating many of the attributes such occupiers seek. However, the sector will fall out of love with Edinburgh if steps aren’t taken to address the space shortages at each end of the size spectrum.
“Either way, the public and private sectors must do more to ensure the stage exists for these actors to perform on. If they don’t, the show will move on.”