Commercial property: Now's the time to grab Grade A bargain

ONE of the floors at the 11-storey, 116,978sq ft Capella development is under offer, according to agent Cushman & Wakefield, and that in many ways sums up the Glasgow office market.

They are Grade A offices with big floorplates of 11,000sq ft and above and there are few others competing at this level – a further 118,489sq ft of Grade A will complete within the G1 development at George Square and the Copenhagen Building in Hope Street.

And that's it – no more Grade A offices will be completed in the city this year and this means there is a window of opportunity for tenants who want a bargain at around 26 a sq ft.

Andy Cunningham and his team at Cushman & Wakefield are doing the rounds at the moment, warning the window of opportunity will soon close and that rents will go up as the supply of top-quality office space becomes tighter.

Cunningham also pointed out that last week, two major London organisations with plenty of money burning a hole in their pockets had been casing the Glasgow joint looking for major investments, with increased rents being the lure.

The latest Cushman & Wakefield business briefing on the Edinburgh and Glasgow office markets showed little optimism – "the worst is anticipated to have passed and 2010 is more likely to be a period of stabilisation rather than growth".

The place for optimism is Aberdeen. From there, consultant FG Burnett reports a high level of activity in the office market, with an upsurge in recent requirements.

It says the increased activity points to greater optimism in the business community and signals a recovery in the office market.

For the most part, headline rental levels are being maintained, although tenants can now expect to benefit from much more attractive incentive packages than have previously been available.

Surveyor Dan Smith said: "However, the pragmatism of landlords and the ability to realise that there are still deals to do has led the Aberdeen office market to continue to outperform similar markets in other UK locations. Offices in the prime west end office district continue to achieve rents in the mid/high 20s per sq ft and there have been a few deals done at or around 30 per sq ft. Demand also remains for modern out-of-town business park space

"We have recently witnessed an upsurge in the volume of inquires, particularly for smaller properties, and the general consensus is that the outlook for the future is positive.

"The local office market has so far managed to avoid a reduction in headline rental rates, although there has been a notable increase in incentives offered to tenants.

"The flexible approach adopted by the majority of our landlord clients has ensured that deals are still happening and if we can maintain that dynamic, it will ensure the revival continues into 2010."

Meanwhile, Walter Boettcher, director of research and forecasting at Colliers CRE, said: "The property investment market seems to be off to a reasonable start, with the monthly transaction total roughly double that of a year ago. The occupier markets are showing increased signs of stability and I find myself having to resist the temptation to succumb to premature optimism."

Matt Oakley, head of Savills' commercial research department, said: "The path is going to be a bumpy one for developers in 2010, with lender caution and leasing market volatility both dragging on development starts.

"However, developers remain optimistic about the future and refurbishment activity, which is often a precursor to a pick-up in development starts, continues to grow."