Aberdeen offices drive commercial property revival

Take-up of Aberdeen office space has hit a new high. Picture: Robert Perry
Take-up of Aberdeen office space has hit a new high. Picture: Robert Perry
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ABERDEEN’S booming office market and the strongest take-up of space in Edinburgh in eight years have helped drive a further recovery in Scotland’s commercial property sector.

New research shows that the overall take-up of office space via lettings and sales last year was well ahead of 2011 levels. The positive outcome comes despite a sharp tail-off in activity towards the end of the year.

Aberdeen enjoyed its highest annual take-up on record, according to the research by property adviser CBRE, as the city witnessed a surge in North Sea oil-related activity.

The boom in the Granite City is expected to continue as companies seek additional space and create working environments that will help them “attract and retain the best staff”, experts noted. The city is also tipped to benefit from the decision to push ahead with the building of the western bypass.

CBRE’s findings should provide a shot in the arm for an office development market that has been badly affected by the global downturn. With financial institutions taking fright, few new-build projects have taken place in the past four or five years.

However, the office markets in Aberdeen, Edinburgh and Glasgow all saw subdued activity in the second half of 2012 compared with the opening six months, providing some caution for the current year.

The research further highlights the squeeze on availability triggered by a shortage of new schemes coming onto the market. Property agents have already warned that the lack of choice could deter firms with large floor-space requirements from setting up in Scotland’s biggest cities, while existing occupiers have limited opportunity to move to newer or larger premises.

In Aberdeen, take-up of office space for the year reached a record high of 830,404 square feet, pushing total available stock to less than 480,000sq ft – the lowest level since 2000.

Some of the key city centre developments are finally expected to begin on site in 2013, as developers look to capitalise on the strength of the market. And the second half of 2012 saw a significant increase in the volume of office market investments, rising to £127.2 million from £78.2m in the first half.
Derren McRae, managing director of CBRE in Aberdeen, said: “We anticipate Aberdeen will continue to experience a high level of investor demand as a result of strong energy sector covenants and long lease commitments agreed on pre-let offices.

“Compared with other UK regional cities, the genuine prospect of rental growth in prime and secondary assets is also proving attractive to investors.”

Demand in Edinburgh was driven by occupiers from banking and finance, and consumer services and leisure sectors, accounting for 32 per cent and 
24 per cent of all floorspace transacted, respectively.

Total 2012 take-up hit 773,059sq ft, the strongest year since 2004. Take-up in the second half was down 43 per cent over the first half – a period dominated by a large-scale deal with investment manager BlackRock.

Glasgow take-up for the year was 374,617sq ft, up 13 per cent on 2011’s total, also skewed towards the first half.