Commercial property: Robust results in office letting

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CBRE’s office market figures for the third quarter of this year show strong results in lettings across Edinburgh, Glasgow and Aberdeen.

Office take-up in the capital reached 134,274sq ft in Q3 2019, bringing the total for the year to date up to 497,668sq ft. The largest deal of the quarter was the letting of 35,000sq ft at Forthstone in Edinburgh Park.

Despite a lower level of take-up than recorded in the previous 12 months, the acute shortage of accommodation at all levels of the market is maintaining the pressure on both headline rents and incentive packages.

The city centre Grade A vacancy rate now sits at 1.84 per cent. Beverley Mortimer, senior surveyor at CBRE commented: “We expect the upward trajectory of headline rents for the best new build and second hand space to continue. Levels of office take-up in Edinburgh remain encouraging, with 16 deals surpassing the 10,000sq ft mark.”

Office take-up in Glasgow for the third quarter of 2019 was exceptionally strong, totalling 352,211sq ft, the highest level in Q3 in over ten years, significantly bolstered by the letting of 272,858sq ft at One Central on Argyle Street by JPMC. Overall Glasgow city centre office supply has risen slightly and now sits at 1,082,569sq ft, a vacancy rate of 8.07 per cent, with a further 185,222 sq ft said to be under offer.

As with previous quarters, there remains a lack of Grade A office supply in Glasgow, with just 6,000sq ft currently available on the market representing a vacancy rate of 0.04 per cent.

But Alistair Urquhart, associate director at CBRE, said: “Helping to address the city’s lack of Grade A space are the two schemes under construction at 2 Atlantic Square and 177 Bothwell Street, due for completion in Q3 2020 and Q2 2021 respectively, along with the comprehensive refurbishment of 55 Douglas Street scheduled to complete in the final quarter of 2019.

“Occupiers continue to be drawn to best in class offices and all three have already attracted a lot of interest. We anticipate that demand may see rents at the two new developments grow to exceed the current £32.50/sq ft headline rent for Glasgow.”

The third quarter of 2019 saw 122,770sq ft of office take-up in Aberdeen, including the city’s largest deal in three years with the letting of 51,356sq ft at B3, Aberdeen International Business Park, to Oceaneering. The figure represents an increase of 27 per cent compared to the same period in Q3 2018.

Derren McRae, head of CBRE in Aberdeen, commented: “Momentum in the Aberdeen office market continued into the third quarter. Looking ahead to the end of 2019, we are of the view that the 400,000sq ft mark recorded in previous years will be surpassed as a consequence of transactions scheduled to complete in Q4.”