Edinburgh’s office market has notched up another strong annual performance with above-average take-up of space by expanding businesses.
But property experts have reiterated their concerns over supply constraints with a lack of new developments coming onto the market.
Property advisor Cushman & Wakefield said take-up for 2018 totalled 855,000 square feet, which exceeds the ten-year average for the fourth year running, and follows the record performance of 1.05 million sq ft delivered in 2017.
Stewart McMillan, associate, Edinburgh office agency, said: “The Edinburgh market has delivered another robust performance in 2018.
“The record result in 2017 was underpinned by several exceptional large lettings, and for the market to back this up again in 2018 demonstrates continued occupier confidence in the city as a place to do business.
“It is of note that much of the activity was established businesses expanding their operations or improving the quality of their space, and this investment bodes well for the future economic health of the city.”
Notable deals last year include Baillie Gifford acquiring 60,000 sq ft at Chris Stewart Group’s 20 West Register Street, Royal London taking 47,000 sq ft from Aviva at 22 Haymarket Yards, and legal firm Brodies securing 43,000 sq ft at BAM/Hermes’ new development at Capital Square.
James Thomson, partner, Edinburgh office agency, said: “Supply pressures in Edinburgh are creating real challenges for occupiers considering relocation, who must act early to secure the best space.
“The effects are evident with the prevalence of pre-letting activity, and indeed the five largest grade A deals recorded during 2018 were all pre-lets. With the development pipeline severely constrained… we expect this trend to continue during 2019.”
Cameron Stott, director at property consultancy JLL, added: “The lack of grade A office accommodation in Edinburgh will restrict the economic growth prospects for the city.
“Notwithstanding the political landscape over the last few years, Edinburgh has continued to prosper with a burgeoning tech sector and a resilient and strengthening financial sector. This growth will be at risk with the lack of business space for the whole spectrum of business from incubator to established firms.”
According to JLL, by the end of 2018, the vacancy rate had dropped to 3 per cent, down from 3.8 at the same point in 2017, and the lowest level since the financial crisis.