Edinburgh office market rides out referendum storm

Edinburgh's office market enjoyed a solid second quarter with a string of new lettings, new research reveals, but property experts have cautioned over the potential impact of Brexit on future activity levels.

Analysis reveals that a total of 180,000 square feet was let in the city centre following a large number of lease renewals  a result that was in line with a year earlier. Picture: TSPL

Commercial property consultancy Knight Frank described take-up of office space as “robust” during the three months to the end of June, despite subdued market sentiment.

The firm’s analysis reveals that a total of 180,000 square feet was let in the city centre following a large number of lease renewals – a result that was in line with a year earlier.

Occupier take-up in the capital racked up its strongest performance for almost 15 years during 2015 but there have been concerns that the run up to last month’s EU referendum and subsequent fallout surrounding Brexit would dampen activity.

Professional services and technology, media and telecoms (TMT) businesses continued to dominate the market, accounting for about a third of take-up during the latest three-month period.

Knight Frank said the strong take-up figures put further pressure on the availability of high-quality “Grade A” accommodation, with rents climbing higher and fewer incentives offered on buildings in the core of Edinburgh city centre.

With a dearth of new schemes coming onto the market, there were also a number of transactions for large offices in the capital, which will be refurbished to Grade A standards. Among these deals was Chris Stewart Group’s purchase of Blenheim House, which is expected to bring some 34,000sq ft of space to the city centre by late 2017 or early 2018.

Toby Withall, office agency partner at Knight Frank in Edinburgh, said that deals continued to brew in the capital.

“The outlook for Edinburgh remains positive, despite the uncertainty hanging over the market following the EU referendum – several significant deals look likely to go ahead, which can only be a vote of confidence in the city”, he said. “However, it’s still too early to say what Brexit’s full impact is likely to be.

“The fundamentals of the market remain strong and the lack of Grade A office space in Edinburgh city centre is pushing up rents – £33 per sq ft, previously considered ‘super-prime’, was achieved in the city during Q2. As Grade A space continues to be squeezed, this is only likely to continue.”

That £33 figure is understood to have been achieved at the Atria development next to the Edinburgh International Conference Centre.

Withall added: “There is little coming through on the supply side and demand remains steady – particularly from the burgeoning TMT sector.

“There are a healthy number of requirements being circulated, although this should be treated with a note of caution – a decent proportion of these are potential renewals for Q1 and Q2 2017.”