Edinburgh office market at ten-year high

Artists impression of the Standard Life Building at 3-8 St Andrew Square. Picture: Complimentary

Artists impression of the Standard Life Building at 3-8 St Andrew Square. Picture: Complimentary

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EDINBURGH saw its strongest office take-up figures for a decade last year, despite concerns from potential occupiers in the run-up to the independence vote, new research reveals.

Meanwhile, property experts have warned that the lack of immediately available new Grade A office space has become more acute, leading to further pre-letting activity.

Figures released by property consultancy JLL show that some 875,000sq ft was transacted through lettings and sales during 2014, up about 13 per cent from the previous year’s total of 773,000sq ft. That represents the highest level since 2004 and significantly above the five-year average of 650,000sq ft.

The firm pointed to two major contributing factors for the “stellar” year for take-up – a spike in activity in the final quarter and the pre-letting of 108,000sq ft at 6 St Andrew Square to Standard Life Investments, a single deal that was the largest of its kind in more than ten years.

While financial services underpinned activity, the city also benefited from the growing strength of the technology, media and telecoms sector which is anticipated to continue through 2015.

The development market has also reacted with three new offices schemes commencing on site in 2014, with others anticipated to follow this year. There is no new development completing in 2015.

Other major transactions during the year included the letting of 75,514sq ft to Rockstar at Barclay House – the former home of The Scotsman newspaper – 26,600sq ft to the Codebase technology incubator at Argyle House, 25,555sq ft to The Scotsman for its new head office at Orchard Brae House on Queensferry Road, and 20,600sq ft to Zonal Data Retail Systems at Tanfield.

JLL said it was involved in some capacity or other in 48 per cent of all transactions across the Scottish capital last year.

Looking ahead, the firm said the market was likely to be skewed in favour of landlords, especially in the city centre.

“As a result of current market dynamics, we will see rental growth whilst tenant incentives continue to decrease,” the company noted.

It also predicted a “ripple of occupier movement” to the western part of Edinburgh over the next couple of years due to a shortage of supply in the centre of town until new development completions come on stream during 2016.

Ben Reed, regional director at JLL, said: “The levels of occupier activity during 2014 really underline the buoyancy of Edinburgh’s local economy, following several years of volatility.

“The final quarter, in particular, witnessed a significant increase in activity, with some indication that the figures were boosted by occupiers who were waiting until the outcome of the referendum before making property decisions.

“What’s clear going forward is that occupiers with lease events in the next two years will have far less choice than they have had for a number of years.”

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