Aberdeen’s office leasing market has experienced its strongest quarter in nearly four years, in a sign that the darkest days of the energy downturn have passed, according to new data.
In its latest study of the market, property company Savills said take-up in the Granite City reached 181,000 square feet in the first three months of the year. That marked its strongest performance since the third quarter of 2013, and not far off total volumes for the whole of 2016 of 183,000 sq ft.
Occupier confidence is slowly but surely returning to the marketDan Smith
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Savills cited key deals including Subsea 7’s 108,000 sq ft assignation to Total at Arnhall Business Park and Marathon Oil taking nearly 32,000 sq ft from Kennedy Wilson at the Hill of Rubislaw in the quarter.
Dan Smith, director in the business space team at Savills Aberdeen, said: “We believe that the worst of the energy market downturn is behind us, and occupier confidence is slowly but surely returning to the market.
“With several active office requirements in excess of 30,000 sq ft, 2017 could see office take-up reach 350,000 sq ft by the end of the year.”
However, Savills also said there is still a shortage of Grade A office space in the city, standing at only about 2.1 years of supply at current take-up rates.
The report also found that sentiment towards Aberdeen’s investment market grew in the first quarter, following a “quiet” 2016 when £30 million of office assets traded. Savills research found office investment reached £49m between January and March this year, boosted by LCN Capital Partners’ £43m purchase of Lloyd’s Register.
Meanwhile, separate data found that the fast-expanding tech, media and telecommunications (TMT) sector remains a “driving force” in Edinburgh’s office market.
Commercial property adviser GVA found that it comprised almost a third of the 34 deals above 1,000 sq ft completed in the first quarter, with the city’s biggest deal Cirrus Logic letting about 22,600 sq ft at Quartermile Four.
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Peter Fraser, associate director of offices at GVA, said the market for sub-2,000 sq ft lets in the city centre “has been particularly active, whilst about a quarter of the total number of deals in Q1 were for Grade A space”. He also said the Glasgwegian office market showed “typical resilience” in the quarter, with city-centre take up at about 103,300 sq ft.
GVA also noted its forecast that in the year ahead, “there will be lease event spikes in both Glasgow and Edinburgh… so the fundamentals of supply and demand in both cities remain strong”.