Strong first quarter demand for Edinburgh office space but lack of quality creates shortfall
Live requirements for Grade A office space in Edinburgh fuelled significant occupier demand during the first quarter of 2018, according to analysis by property consultancy, Knight Frank.
The latest commercial property figures show approximately 460,000 sq. ft. of new occupier requirements came onto the market in the first three months of the year from companies looking to lease office space in Edinburgh. This demand suggests that a recorded decrease in total office take-up compared to the same period in 2017 (203,000 sq. ft. down to 146,963 sq. ft.), does not reflect the true picture of a more buoyant commercial property market in Edinburgh.
Notable agreements within the first quarter of 2018 include Regus’ collaborative working concept, ‘Spaces’, taking around 30,000 sq. ft. at One Lochrin Square and engineering consultancy, SWECO, acquiring approximately 15,000 sq. ft. at Edinburgh’s Quay 2, in deals involving Knight Frank.
Simon Capaldi, office agency partner at Knight Frank, said: “While Edinburgh has recorded a lower Q1 take-up than the same time last year, there’s still a positive story to tell of the city’s office market as a whole.
“In the first quarter of 2018, there were significant new occupier requirements – approximately 460,000 sq. ft., with a particular appetite for space and office accommodation around the 5,700 sq. ft. mark. The average requirement size has also increased by approximately 1,000 sq. ft. compared to the first quarter of 2017. With city centre Grade A availability currently sitting at 275,000 sq. ft., there’s a clear shortfall if the city is to meet the current occupier demand.
“Technology, media, and telecommunications (TMT) companies continue to play a prominent role within Edinburgh’s office market, accounting for approximately 30% of transactions in the city. But with deals including State Street Bank taking 65,626 sq. f.t at Quartermile 3 and the Government Property Unit (GPU) agreeing a 186,500 sq. ft. pre-let at New Waverley, the occupier type swayed back towards financial services and government in the first quarter of 2018.
“Looking ahead, we believe we’ll start to see more TMT companies influencing the Edinburgh office market throughout the year, with further collaborative working initiatives potentially arriving to join the likes of Regus Spaces. During Q2 and Q3, we’ll see a number of deals conclude which are currently underway, and we’d also expect some interesting pre-let announcements to be made.
“There is an encouraging development pipeline in Edinburgh, but most of the space currently under construction is likely to be pre-let in part, or whole, by completion, leaving limited options for occupiers currently searching for suitable Grade A accommodation.
“Businesses therefore need to think carefully about their next move, and may be forced to consider outside of the core city centre due to a lack of modern, open-plan space and rising costs. We’ve recently observed an increase in companies looking at areas such as the west of Edinburgh, which can potentially provide Grade A offices to meet their requirements, albeit further afield.”