Space in demand – but top-end rents down

Published on Monday 24 August 2009 18:55

TAKE-UP of prime office space in Edinburgh has almost doubled in the last quarter – but rents for the top accommodation are down slightly and are on a par with Glasgow and Manchester, according to the latest research by Cushman & Wakefield.

It reports that the amount of new office space leased in the city centre increased to 44,109sq ft and the transaction size has also increased.

The largest letting in the second quarter was the 17,697sq ft taken by accountants Scott Moncrieff at Exchange Place, which has had significant early success since its launch in June. It also attracted actuaries Hymans Robertson, who took 13,029sq ft.

Rents for Grade A accommodation were slightly down at 28.50 per sq ft – the same as Glasgow – and Angela Lowe, head of office agency in Edinburgh, says it is encouraging that headline rental decline to date has been limited in Edinburgh. Other centres like Manchester (28.50) and Cardiff (21) are struggling to maintain rental levels, and Birmingham (30) has been hardest hit with prime rents down 9.1 per cent.

"Companies are still prepared to move in the current economic climate to the highest quality offices in the best locations as a result of expansion needs or a flight to quality."

Knight Frank also majors on flight to quality in its latest UK Market Outlook. It says it is driving demand for prime assets, prime locations, long leases and strong covenants.

It says that just about everyone wants to buy the same thing but, with the worst fears of a deluge of distressed sales seemingly put to rest, few are seeing reasons to sell.

On hopes for a market recovery, Claire Higgins, head of commercial research, says the overriding message is not to get too carried away.

She goes on: "Having personally become very bored very quickly with the all-pervading gloom we were subjected to for so long, I'm equally wary of the now ebullient tone commonly being adopted. But then I am a researcher. We're not exactly excitable types.

"Still, while the glimmers of hope and good news should most definitely be welcomed – we've earned some, after all – it shouldn't be assumed that this is going to translate immediately across the market. We fell hard and fast, but the journey back up is likely to be a more steady one."

Flight to quality for some – and planning for the future for others.

Alistair Hardie, head of Standard Life's Self Invested Personal Pensions (Sipp), says commercial property has clearly captured the imagination of many investors.

He continues: "We believe that confidence is returning to the commercial property market, although we anticipate further downward pressures in returns for current holders of UK property over the next 12 months.

"However, longer-term investors, particularly those with equity holdings, should begin to look more closely at the property market."

In the west, negotiations are under way with supermarket operators for a superstore which will be a key part of a major developments planned for Irvine.

Gleniffer Walker (Irvine) – a joint venture between Gleniffer Estates and Walker Group – and Alexander Morton Homes has lodged a planning application with North Ayrshire Council.

The intention is to create a 40 million mixed-use development on a 33.13 acre site, part of which used to be a dog racing track, in Irvine.

The plans include a superstore, a care home, 33 new mixed-tenure homes, a community sports centre and 355 car parking spaces. And there will be a new football stadium for junior side Irvine Meadow and community sports facilities including new all-weather pitches and upgraded full and five-a-side grass pitches.

Bunker sale goes down like a bomb

NOT surprisingly, the two deals have been hush-hush all the way. On behalf of the Defence Estates, GVA Grimley has sold the former Royal Observer Corps bunker in Connel near Oban and a former Uniter building in Outhmuir near Dunfermline. The Uniter building was one of three built in Scotland as part of a secure survivable integrated network for the RAF. Front access is through a heavy steel door with a unique locking system and an emergency exit to the rear. The Connel shelter has three non-operational buildings, including the former observation bunker building, the former Second World War operations centre and a small fuel storage building. A lot of buyer interest, apparently, but all GVA will say about the outcome: "Both properties have been sold to private buyers on confidential terms."

STANDARD Life has added another commercial property to its Sipp (Self Invested Personal Pensions) platform to bring the total number of properties, mainly offices, shops, industrial units, dental practices, pubs and storage units under management to 1,000 in less than five years. All it will say about the 1,000th acquisition is that it is a warehouse in the Wirral, Merseyside, and when asked about the price it says: "Sorry – client confidentiality."

TRAVELODGE is to have two new outlets in Edinburgh. It has signed with developer Ashford Property Group for 115 bedrooms at Cameron Toll – 35 years at an annual rental of 627,440 – and for 93 bedrooms at Waterloo Place – developer Beaghmor Partnership – at 674,250 a year for 35 years. Eric Young acted for Travelodge, with Davidson Chalmers for Beaghmor.

ROSEWELL House, a Scotmid development just completed at Connect Business Park, Edinburgh, has already signed up its first tenant. Diet Chef, which specialises in calorie-controlled hampers, has taken 2,641sq ft on a five-year lease at 17 a sq ft. Ryden and Cushman & Wakefield are the agents.

MOUNTAIN Warehouse is moving into the former Woolworths store at 31 Albert Street, Kirkwall. It has taken 13,595sq ft on the ground and first floors on a ten-year lease at 45,000 a year. Culverwell acted for the landlord, John Smith & Co (Edinburgh), with Gunn Property Consultants for Mountain Warehouse.

RJM Developments, represented by Eric Young, has let a 1,090sq ft unit to Greggs (Savills acting) in Glasgow Road, Dumbarton, for 15 years at 25,000 a year.

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