Knight Frank: Lack of office development threatening Edinburgh’s economic growth
No available new office space is currently under construction in Edinburgh despite a strong rise in demand from occupiers as they return to the workplace, threatening the city’s economic growth, Knight Frank has said.
The independent commercial property consultancy said there is now new build office space under construction that has not already been pre-let.
Although there are more than 400,000 sq. ft. of major new build and refurbishment projects set to be completed over the next two to three years, 746,950 sq. ft. of requirements have been issued already during 2022 for city centre space at an average size of around 5,100 sq. ft.
Knight Frank has pointed to the success of Haymarket Edinburgh as an indication of the level of demand for new office space in the city centre and the wider flight to high quality accommodation. The development is fully let ahead of its first building being completed later this year.
The firm’s research from 2019 also highlighted the lack of Grade B space available in Edinburgh to absorb excess demand, with 720,000 sq. ft. of Grade B office space converted through planning for change of use, largely to hotels and residential.
Toby Withall, office agency partner at Knight Frank Edinburgh, said: “Edinburgh has a clear supply-demand imbalance: there is no new build space coming through until 2024, yet the level of demand is as strong as it has been for a long time. While some occupiers are downsizing on the back of the pandemic and incorporating more hybrid working, many are still very keen to have quality space in the city centre available to their staff.
“Refurbishments will help the situation, but an increasing number of occupiers want new build space that matches their ESG requirements. And, unlike many other major cities, much of Edinburgh’s Grade B office supply has been converted for other uses, even though that slowed during the pandemic.
“It is concerning that, as a growing capital city looking to attract businesses, we are close to a point where there is going to be no space to accommodate them. Haymarket Edinburgh demonstrates there is insatiable appetite for high quality new space with access to the amenities you typically only find in a city centre.
“Edinburgh has become a victim of its own success as a great place to live and visit, which is in danger of stymieing the economic growth delivered by developing businesses in the city and attracting them from elsewhere. We need to address the lack of options in the city centre as soon as possible, opening up more opportunities for development.”