Prime office rental rates remain floored

Published on Monday 17 May 2010 19:01

THE headline rent of prime office space in Edinburgh city centre has dropped in the past year from £29.25 per sq ft to £27 per sq ft, according to figures for the first quarter of 2010 revealed by Cushman & Wakefield.

However, the "unofficial" headline rent for accommodation within this category is more likely to be in the region of 22 per sq ft, according to Cushwake's Edinburgh-based office partner, Angela Lowe.

"Obviously the big difference is the result of substantial concessions still on offer. There is plenty of evidence of tenants being prepared to sign leases of 15 or even 15-plus years, and any landlord with this in prospect will try their hardest to secure a deal," Ms Lowe said.

Even the figure of 22 is an estimate. "All buildings are letting from the top down and there are substantial discounts available to those prepared to take ground floor accommodation," said Ms Lowe, commenting that with the recent dearth of new-build there was relatively little penthouse space available in the prime city-centre market.

Meanwhile, prime rents on Edinburgh Park – whose levels at one time were not far behind those of the city centre – are lingering at around 18 per sq ft (and that's the headline rate).

Overall, the figures display a somewhat yo-yo performance. Take up in quarter one is slightly down on Q4 of 2009 but significantly up on Q1 of 2009, but the last statistic is due largely to three significant lettings, including the 55,000 sq ft pre-let to the Scottish Qualifications Authority at Shawfair – which isn't officially within Edinburgh.

Ms Lowe said she did not anticipate any increase in either headline or "unofficial" rental rates until the autumn although it might be reasonable to anticipate the beginning of an upward trend towards the end of the year.

A better picture has emerged in Glasgow, where take-up in the city centre increased by a whacking 901 per cent on the last quarter of 2009 to 62,500sq ft. There were five deals over 4,500sq ft, the largest of which was to RSA at BT's Alexander Bain House, 100 Broomielaw. By contrast, out of town take up over 4,500sq ft was 17,700, significantly down from 80,809 in quarter four of last year.

Headline rents for prime space in Glasgow city centre are what they were a year ago – ie 26 per sq ft, with grade-B prime attracting 19.50. Out-of-town headline rents in the first quarter of this year ranged from 16.50 at Bellshill to 11.50 at Paisley.

Meanwhile, in a deal just confirmed in Edinburgh, Baillie Gifford will occupy a further 12,058sq ft at its head office at Calton Square, having taken over an existing lease from the global bank, Citigroup. This will take BG's total accommodation to 110,000sq ft when it occupies the additional space towards the end of the year.

Both parties declined to comment on the letting details, but it appears that an initial rental of 27.50 per sq ft was agreed. There is believed to be one rent review prior to the end of the lease agreement in 2019.

Ryden acted for Baillie Gifford and Cushman & Wakefield for Citigroup.

On the right track Boom time for Princes St office centre

THE Abbey Business Centre will have the benefit of being located directly opposite the only stop (or "station") on Princes Street when Edinburgh's new trams start running – 2014 according to the main contractor, Bilfinger, but 2012 insists TIE, the future operating company.

However, business centre manager Lee Stoddard has already managed to bring the 30,000sq ft serviced office complex to full capacity – trams or no trams.

Tesco Bank has 3,000sq ft on an initial six-month licence to supplement space at its Edinburgh base in Haymarket. Other recent arrivals are Gilbert Ash, Kilmartin Property Management and tax solutions company, AGL, which has expanded its operations from Abbey's Beacon centre in Glasgow.

Ms Stoddard said: "Our recent raft of clients is made up of companies looking for both long-term premises and shorter-term space solutions, which is further proof of the capability of serviced offices to meet both requirements."