Rents for Grade B office space in Scotland are topping the UK growth chart as a lack of prime space bites, a new report has revealed.
Colliers International’s office rent map study shows that rents for Grade B office space jumped 19 per cent in Scotland over the last year as prime space availability dwindles and firms turned to older buildings.
The growth in rents was the highest of any part of the UK, and well above the UK average of 5 per cent across both Grade A and Grade B office markets.
Glasgow and Edinburgh city centres saw rental growth of 18 per cent and 19 per cent respectively, but the biggest rise was in “out of town” Edinburgh, where Grade B office rents surged by 44 per cent, year-on-year.
Mark Taylor, head of national offices, Colliers International, said: “The lack of new, prime offices coming onto the market in Edinburgh and Glasgow means growing businesses are having to look at older properties, and landlords are in a good position to negotiate considerably higher rents on anything that can realistically be refurbished to meet the high standards most tenants now want.
“This is not only reflected in rents: our data shows that the incentives that landlords are having to offer to get tenants to sign are also relatively low in Scotland, compared to other UK cities.
“The latest rent increases will further incentivise investors to back building projects in Edinburgh and Glasgow. The question is, will planning authorities help the market keep pace with demand?
“Either way, with relatively little in the pipeline and no sign that demand is slowing, we should see further rent increases north of the Border in the current year.”
Grade A office rents rose 8 per cent in Scotland over the last 12 months, with the Edinburgh outskirts once again leading the way with growth of 19 per cent.
The UK regional office market – excluding London and the Republic of Ireland – has seen average year-on-year rental increases of 5 per cent for both Grade A and Grade B office space between 2018 and 2019. In some areas, the rental growth was relatively modest – outer London saw rents gain just 2 per cent for both Grade A and B.
Colliers’ report also shows a number of regional cities moving further into the £30-plus per square foot region, with Bristol (£35 per sq ft), Manchester (£37.50 per sq ft), Edinburgh (£35 per sq ft), and Glasgow (£32.50 per sq ft) all seeing increases in prime rents of between 5 and 8 per cent, year-on-year.
Taylor added: “Major regional cities such as Manchester and Edinburgh continue to see prime headline rent increase year on year, bringing them comfortably and sustainably into the ‘thirty’s club’.”