Recently, law firm Brodies acquired 43,000sq ft of the 122,000sq ft Capital Square development, while Pinsent Masons has just announced taking 25,000sq ft in the same building, which can only add to the pressure on the city centre’s dwindling supply.
Only three new-build developments are currently underway in Edinburgh – New Waverley, The Mint and Capital Square – alongside the recently completed 2 Semple Street building, so realistically no more than 400,000sq ft will come to market in the next two to three years.
Taking into account pre-let space, this figure falls further to leave a short-to-medium development pipeline of about 92,000sq ft.
Thus, high demand and limited supply has become synonymous with the Capital’s city centre commercial office market, and while many cities across the UK suffer from similar demand issues, the challenges faced by Edinburgh are unique.
Its position as one of the tourist capitals of the world means it is very difficult for new developments to get planning permission.
While defurbs and refurbs play a role in filling the void, a lack of city-centre brownfield land has severely stifled the growth of purpose-built office space.
Much of the grade-B space is hoovered up for alternative uses, including hotel and residential accommodation.
Needless to say, space will come through in time – the popularity of a city-centre postcode demands it – but in the meantime rents of new space in the centre will continue to rise, placing it out of reach of many.
But could this squeeze become an excellent opportunity for another area to become key?
Cue the West of Edinburgh to take the stage. Unlike other major hubs, the Capital does not have a large cluster of mixed-use developments around its airport, meaning the area is ripe with potential for office space.
The city’s tram network has been a boon for access to the airport and surrounding areas, and Edinburgh Park is one of only two business parks in the UK with a dedicated rail link. Motorists are also well catered for with dedicated car parking – unlike in the city centre.
We are seeing continued developer interest in the area, with planning sought for Edinburgh International Business Gateway’s £700 million commercial and residential development.
Forming part of a wider strategy of westward expansion, the plan signifies a recognition of the inevitable shift to the peripheries of the city to satisfy demand.
Thanks to the transport links already in place, adequate space, value for money and access to the lifestyle benefits being based in the Capital affords, it may not be long before we see the West of Edinburgh join the UK’s commercial property scene as one of the key players jostling for position as a destination hub for businesses.
Toby Withall is a partner at Knight Frank