Warning over future office space shortage

A SHORTAGE of speculative office developments in Edinburgh will prove a serious problem in the next three years when there will be a surge of firms looking to move premises, according to consultants.

Jones Lang LaSalle estimates that a fifth of all office occupiers in Edinburgh will have "lease events" between 2014-2018 and will want to upgrade from outdated buildings constructed during the 1970s and 1980s.

These events will either be lease breaks for firms that negotiated short agreements in 2008-2009, or lease expiries for companies that took on 25-30 year contracts during the late 1980s and early 1990s.

Although there is currently an oversupply of space in the capital, Cameron Stott, a director at JLL in Edinburgh, says the market will be short of appropriate, modern premises in three years unless developers return to the capital.

Developers vanished from the market during the recession and there is only one project under construction - H1 at the Edinburgh International Conference Centre.

"The short-term picture is still pretty tough but we are seeing the supply gradually being eroded with no new supply coming through," said Stott. "Looking forward to three years' time, there's a whole load of lease expiries coming through."

He said some companies in very old buildings have already started searching the market for suitable premises - particularly modern offices that meet low carbon criteria.

Patrick Hannay of Colliers International's Edinburgh office agreed that there will be pent-up demand.

"There has to be more developments in Edinburgh for occupiers to be able to move into what they require," he said.

"A lot of firms don't want to move into the town house offices now, they are looking for modern facilities."