£21m Cordea sale may prove Quay to success

A PRIME development in Edinburgh's Fountainbridge has been sold for £21.1 million, providing a boost for a new financial district, which many feared was losing its appeal to investors and tenants.

Edinburgh Quay 2, a joint venture between Miller Developments and British Waterways, has been sold to the Luxembourg-based Cordea Savills European Commercial Fund. The deal reflects a yield of 6.1 per cent.

The property, which houses several firms including Baker Tilly and Pinsent Masons solicitors, is one of several major office developments in the area, which it had been hoped would extend Edinburgh's financial district beyond The Exchange area.

Since the onset of the credit crunch in 2007, developers have struggled to shift land and office space. About 20 per cent of the 60,134sq ft Edinburgh Quay 2 remains to be let, and some tenants in surrounding developments are looking to leave the area.

Edinburgh Quay is next to a site HBOS, before its takeover by Lloyds Banking Group, hoped to develop into a global headquarters. The firm developing housing and offices on the nearby site of the former Scottish & Newcastle social club was also forced into administration last year.

One commercial property source said: "Edinburgh Quay 2 is a risky deal because it's surrounded by Bank of Scotland offices and many are watching to see if the bank will dump space."

Edinburgh Quay Ltd, the firm behind the development, said the building had attracted several bids even though it was not formally advertised.

Pamela Grant, the director of Edinburgh Quay Ltd, said: "Quay 2 was not being actively marketed but the quality product coupled with an impressive tenant line-up attracted the offer from Cordea Savills."

The sale comes amid fresh evidence that Glasgow once again outperformed Edinburgh for commercial property deals last year.

The Glasgow office market staged a major comeback in 2009 with the total value of office sales almost tripling to 237.8m, according to a report from CB Richard Ellis (CBRE). The city's office occupier market also grew 12 per cent compared with the previous year.

Conditions in Edinburgh in 2009 remained uncertain, according to CBRE. The total value of office purchase deals dropped by 7 per cent, to 209.6m, while the take-up of office space in Edinburgh was also down 24 per cent.

Stewart Taylor, a director at CB Richard Ellis, said Glasgow's strong performance was down to a number of very large properties coming on the market in 2009.

Glasgow's office occupier market has also benefited from the city's more mixed economy, Taylor said.

He said: "Edinburgh is now suffering from its reliance on the banking and financial sector. Glasgow has tended to attract more 'footloose' occupiers."