Lack of Grade A offices looks likely to drive up rents across Edinburgh

RENTS on office properties in central Edinburgh are set to rise while incentives to attract new tenants will fizzle out, industry experts have predicted, as the supply of top-grade space continues to tighten.

The lack of major so-called “Grade A” office developments coming on to the market has been highlighted for some time as lenders batten down the hatches. Property commentators believe that could put off some bigger employers from setting up in the city.

Publishing its latest research, property consultancy DTZ said Grade A accommodation was driving the Edinburgh office market and accounted for about three-quarters of city centre space acquired during the second quarter.

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The report noted that Grade A availability has dropped below 400,000sq ft for the first time “in a number of years”. Like most of its peers, DTZ is predicting a shortage of supply as lease expiries allow occupiers to move over the next few years.

Mark Jones, director at DTZ’s Edinburgh office, said: “Tenants with impending lease events are already considering pre-letting as a means of securing ‘best in class’ space as the market tightens. Developers are widely reporting an increasing number of discussions on this basis, although funding remains tight.

“In return this means leasing agreements will need to be long-term at 15 years-plus, and to support profitable developments, likely to be at rents of around £30 per sq ft.”

The research found that prime rents in the city centre were unchanged in Q2 at £27.50 per sq ft.

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