New office construction suffers from Brexit blues
Firms are being starved of suitable accommodation in Scotland’s main economic centres, as investors exercise caution ahead of Brexit, according to commercial property consultancy Colliers International.
Research presented at the firm’s recent Scottish economic breakfast briefing suggests that businesses have weathered the ongoing political storms well, with demand for prime office space likely to remain strong going into the new year.
Activity was only marginally impacted in the wake of the Scottish independence referendum and recent GDP figures suggest Scottish firms have recovered better than their English peers from the Brexit vote fall-out.
Patrick Ford, a director in Colliers’ capital markets team in Scotland, said the past 12 months had seen soaring office demand in Glasgow, in particular, where major deals in financial services and the public sector meant property activity for 2018 was set to be double that seen in recent years at more than one million square feet.
But he cautioned: “Although there is every indication that demand for premium offices will continue into next year – there are several large companies specifically looking for space – it is another matter to persuade developers and investors to make a move at this time.
“It’s unfortunate, as this should be a time of real opportunity for the city, with many key sectors and employers looking to beef up their presence, to take advantage of the skilled workforce, good communications and other advantages Glasgow offers.”
Property peer JLL recently reiterated its warning of a “critical” shortage of high-grade office supply in Edinburgh city centre. Experts at the firm said that despite the strong levels of occupier activity in recent quarters, there was a very low pipeline of new office space coming through.
Colliers’ Ford said investor interest in Scotland remained strong, especially from overseas investors, who are benefiting from the current weak pound.
However, like developers, investors are inclined to wait and see what happens with Brexit, he added.
Ford said: “It’s very encouraging to see such healthy demand from major employers and value creators in the city, but business needs space to grow.
“Rents are under upwards pressure and in theory that should help, but we need to see cranes on the skyline.”
The briefing also showed that what really moves Scotland’s economic output is the price of oil, which has strengthened this year.