Ryden review strikes gloomy note for battered Scots office letting market

Published on Saturday 24 October 2009 15:30

SCOTLAND'S office market has plunged to a 16-year low as a battered commercial property sector struggles to regain momentum.

A dearth of smaller lettings, which normally underpin the city centre office markets in Edinburgh and Glasgow, means activity levels are on a par with those seen during the recession of the early 1990s.

The gloomy finding is contained in Ryden's 65th biannual Scottish Property Review.

The report, due to be posted out to clients this week, details every major office, retail and industrial letting and investment deal over the past six months. It is seen as a reliable benchmark of the Scottish marketplace.

Mark Robertson, the firm's head of consulting and author of the report, said: "Activity is tight because companies, where possible, are choosing not to move. Many are renegotiating lease renewals, delaying any planned relocation.

"What we need to see is an end to rising unemployment and companies beginning to recruit again and expand rather than staying put.

"Until that happens, there's not much prospect of a significant recovery in the property market."

The report noted that sales and lettings of office space to smaller indigenous firms and service companies in Glasgow had slowed to a "trickle".

Total take-up of 56,713sq m over the full year to September was boosted by a string of larger deals, including Tesco Bank's expansion.

A combination of reduced activity levels, the completion of new developments and the release of second-hand office space has increased Glasgow's city-wide office supply by almost a fifth to just under 300,000sq m.

Ryden said a lack of new developments amid the current financing drought should reduce vacancy rates over the next 12 to 24 months.

In Edinburgh take-up of 20,665sq m over the six months to September took the 12-month figure to 47,247sq m – 40 per cent below the ten-year average and the lowest level since 1993.

Empty office space in the city has increased by 15 per cent since March to just over 280,000sq m. Waverley Gate, the former General Post Office building on Waterloo Place, accounts for 20 per cent of the Grade A office supply.