Exchange Place poised for year's biggest let as Wood Mackenzie mulls move

Published on Saturday 26 September 2009 16:17

SCOTTISH energy consultancy Wood Mackenzie is understood to be moving to the new Exchange Place development in Edinburgh in what would be the capital's biggest letting transaction this year.

The firm, based in Queen Street, wants 40,000 sq ft, about a fifth of the total available space in the development, part of the Exchange District, home of the Edinburgh International Conference Centre (EICC).

It is thought Scottish Widows Investment Partnership (SWIP), which owns the development of three buildings, wants 28 per sq ft, meaning a 1.1 million a year rent for Wood Mackenzie.

SWIP and joint agents for Exchange Place, Jones Lang LaSalle and Cushman & Wakefield, have admitted offering incentives to attract tenants in the downturn.

Others taking space include actuarial consultancy Hymans Robertson and accountancy and professional services firm Scott-Moncrieff, which will occupy 17,700 sq ft.

There was no official confirmation of the Wood Mackenzie deal but Darryl Tidd, investment director at SWIP, admitted: "We are in detailed discussions with an occupier about taking a large amount of space in one of the buildings, which would – if we conclude negotiations – take us to about a third of the scheme let."

In June, private equity group Candover raised 553m from selling its 67 per cent stake in Wood Mackenzie to Charterhouse, another London-based private equity group. At the time of the deal, Stephen Halliday, Wood Mackenzie chief executive, said the firm would be moving into the "next phase of its development".

If the letting is finalised it would help lift Edinburgh's commercial property market and ease concerns about the prospects for Exchange Place in the current economic climate.

Tidd said: "From an investment view, short-term development profit from Exchange Place has to some extent been eroded by the market. But we have a lot of confidence in the scheme and the potential for capital values to increase.

"Original rents we used to appraise the scheme have not been impacted that much, but we have had to increase incentives."

Cameron Stott, director at Jones Lang LaSalle, said: "Exchange Place was conceived pre-credit crunch, but was completed in the toughest market we've ever experienced."

Tidd expects more interest in Exchange Place, because of a lack of top quality office space in the city.

He said: "Edinburgh hasn't really seen an oversupply of developments. There's nothing else coming out of the ground.

"Even if you started now on a scheme, you are looking at 2012 to 2013 for delivery. There's a relatively limited choice for tenants. Current supply could disappear in the next two or three years."

But opinion is divided on whether the Exchange District needs a new vision for the future, or can continue attracting high-profile tenants. It was conceived 20 years ago by architect Sir Terry Farrell. His plan was intended to transform that part of Edinburgh – formerly railway land – into a modern, commercial zone.

It now employs about 17,000 staff in more than two million sq ft of office space and is home to big names, including Scottish Widows, Standard Life and Bank of New York Mellon.

But Farrell, formerly Edinburgh's design champion, has recently hit out at plans for a long-delayed extension to the EICC. His practice had been the joint architects for the initial extension plans, but they were shelved when the original developers pulled out. The EICC and city council are jointly pursuing new plans from London rival the Building Design Partnership.

Nick Ryden, real estate partner for law firm Shepherd and Wedderburn, based in the area, said: "I'm a bit disappointed with the masterplanning. It's something like eastern Europe before the Berlin Wall came down. The environment can be a bit lifeless."

But Angela Lowe, a senior manager at Cushman & Wakefield, said: "Corporates want to be in similar properties to those they occupy in London. When we bring overseas investors to Edinburgh, you see their eyes light up when they see the Exchange."