Publishing a new report, property adviser Knight Frank said that more than 700,000 square feet of office space had been converted through planning for change of use to the likes of flats and hotels. Meanwhile, a lack of development land has hindered the delivery of new office space for businesses expanding or moving into the capital.
The firm said that, while new hotels and residential space were crucial for the city, a balance needed to be struck to stop the “unsustainable” rate of conversion from offices.
Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Tourism has proved a double-edged sword for Edinburgh. Visitors coming to the city and spending money is great news for hotels and retailers, but it’s had unintended consequences for other sectors.
“The supply of office space is reaching perilous lows and rents continue to rise for space in Edinburgh’s core. At the same time, the city’s population is growing at a robust rate and, combined, these pressures are taking space from the business community at an unsustainable rate.
“Local authorities in other parts of the country – such as Newcastle City Council – have found ways of encouraging development, with the public sector de-risking the process.
“Edinburgh’s planners could be more rigid by ensuring suitable city centre sites go to offices; however, it’s incumbent on everyone involved in Edinburgh’s property industry to come together and think of creative ways we can use the available land to its full potential.”
In the ten years to 2017, Edinburgh’s population has risen by 12.5 per cent and annual visitor numbers have reached 4.26 million.
Meanwhile, planning permission has being granted for a 1970s Edinburgh office building to be transformed into a 157-bedroom hotel.
Osborne House, located within the Wester Coates area, just to the west of the city centre, will be converted into a hotel, with a restaurant and bar on the ground floor.
York-based property developer S Harrison acquired the four-storey building last year and the development is one of five that the firm is currently working on Edinburgh, which have a total gross development value of £140 million.
Designed by the modernist architecture studio Morris and Steedman, Osborne House is located a short distance from Haymarket station and tram stop.Ann Scott, S Harrison’s managing director, said: “It’s the ideal location for a hotel. Osborne House has a prominent corner position and benefits from excellent transport connections.
“We will be retaining the current structure and facades of Osborne House but repairing and refurbishing the entire building as well as creating a new top floor, which looks out over Wester Coates.
“Replacing the dated elements of Osborne House, which has been largely unoccupied for the last three years, with a vibrant new hotel will not only create employment opportunities, but reinvigorate this tired old building and give it a bright new future. Our successful track-record for hotel development has been recognised by the local community and planners, and we look forward to bringing the scheme forward.”