Demand for Glasgow of?f?ice space rebounds

TAKE-UP of office space in Glasgow has increased for the first time in two years as demand from financial services companies such as NFU Mutual saw the market enter a "tentative recovery", according to a report from Colliers International.

Occupation increased by 263,545 square foot in 2010 - a marked turnaround from 2009 when it fell by 107,000 sq ft as companies went bust or downsized, and investors were forced to put properties back on the market.

Although the pace slowed towards the second half of the year, availability of office space in Glasgow now stands at an 18-month low, the report says.

Peter Leburn, head of offices in Glasgow for Colliers International, said there was particular demand for grade A space as a number of professional services firms took the opportunity to upgrade to better buildings. A number of financial firms with large space requirements also entered the market.

Financial and business services firms accounted for almost 70 per cent of take-up last year, Leburn said. Insurance companies NFU Mutual, Royal & Sun Alliance and Towergate signed leases for 100,000 sq ft of space between them.

Prime rents in the city remained "stable" at 29 sq ft - slightly lower than the record 29.50 sq ft record set at the G1 building in George Square in 2009 - but Leburn said a lack of grade A developments in the pipeline could potentially force rents higher.

The next new-build office development in Glasgow - at 110 Queen Street - is not expected to complete until next year at the earliest. "Because of this lack (of new developments] there is quite a likelihood that rents will go up," Leburn said.

Demand is this year expected to be driven by the renewable energy sector, with the Spanish firm Gamesa recently announcing plans for a research facility for offshore wind technology in Glasgow. Leburn said the mood was one of "cautious optimism" for 2011. "There are still requirements out there," he said.

However concerns are growing over so-called "grade B" space. With many firms having taken advantage of the recession and lower rents to upgrade, property experts fear a number of second-class office plots could lay dormant this year unless landlords risk refurbishing them and target tenants that aren't able to get their hands on the dwindling grade A space available.

Guy Grantham, director of research and forecasting with Colliers International in Scotland, said: "We fully expect the public sector to divest itself of further office space over the next 18 months, as and when leases expire.

"While the public sector has averaged take-up of 80,000 sq ft a year since 2000, 2010 saw one of its lowest totals on record."

Last week when a duo of investors including London-based Sovereign Land bought Ayr Central shopping centre for 33.8 million.