Physical offices 'here to stay' as record deal helps prop up Edinburgh market

A record pre-let deal resulted in the Edinburgh office market recording its highest quarterly take-up figure in more than two years.

An artist impression of the new offices at the Haymarket Edinburgh development which investment firm Baillie Gifford announced during the summer that it was planning to move to.

Over the third quarter of 2020, office take-up in the capital totalled 315,977 square feet, a 135 per cent leap from the same period in 2019 and 73 per cent up on the five-year average, according to property adviser CBRE. It marks the strongest outcome since the second quarter of 2018.

The latest quarter’s strong performance was chiefly down to investment firm Baillie Gifford’s pre-letting of two buildings at The Haymarket development, in the west end of the city, a deal which represents Edinburgh’s largest ever pre-let, totalling an estimated 280,000 sq ft.

CBRE also pointed to some “significant” deals completed in the sub-10,000 sq ft market.

In terms of supply, 1,690,824 sq ft of office space is available in Edinburgh, which represents a 5 per cent rise from the previous quarter’s supply figure and a 32 per cent increase on the year-on-year figure.

The firm claimed city centre supply remains “critically low”, at 822,620 sq ft, with Grade A city centre stock at a premium with 271,221 sq ft available.

Angus Lutton from CBRE in Edinburgh said: “Whilst we expect there to be more challenging conditions in the last part of the year, encouragingly, new requirements are being brought to the market and viewings are taking place again as companies resume searches which had previously been placed on hold.

“Firms have begun to adapt to the changes that Covid-19 has brought but it is still too early to fully understand the lasting impacts.

“In some instances requirements have been reduced whilst other companies demand more space for the eventual return of their staff at a lower density. A common theme in all markets is the flight to quality space, as ironically the workplace becomes more important in the post pandemic world.”

Stewart Taylor, head of CBRE’s Scottish office agency business, added: “Comments forecasting the death of the office are misplaced: a greater prevalence of flexible working does not translate into occupiers taking less office space, but different space, as the need to exchange ideas, collaborate and innovate outweighs short term concerns.

“There is an industry-wise acknowledgement, supported by research, that despite ongoing restrictions the physical office is here to stay, as businesses plan to adopt hybrid work practices.”

In Glasgow, office take-up totalled 86,615 sq ft during the third quarter, a 76 per cent slide from the same period in 2019 and 66 per cent down on the third-quarter five-year average.

This brings the total take-up for the year so far to 343,359 sq ft, which is 48 per cent down on the same period in 2019.

Alistair Urquhart, director at CBRE in Glasgow, said: “Despite a continuing challenging climate, we’ve been encouraged by improving levels of demand for space.

“There were over 30 new requirements for office space in Glasgow in the third quarter as office occupiers sought to move to business space that is suitable for the needs of both their workload and, perhaps more importantly, their staff.”

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