Strong Q3 for Edinburgh office market

Published: 10 December 2018

Office market activity in Edinburgh is on course for another 1m+ sq ft transacted in 2018. We spoke to Stewart Taylor, advisory & transaction services senior director at CBRE.

Your business in brief? 

CBRE is a global property firm headquartered in Los Angeles. We are the world’s largest commercial real estate services and investment firm and we have more than 80,000 employees across 450 offices worldwide.

Attracting and retaining staff is of ever increasing importance and Edinburgh as a city to live and work in scores very highly across a range of measures. This drives occupiers towards the provision of high quality workspace which increasingly makes a relocation the most attractive option.

Stewart Taylor, advisory and transaction services senior director, CBRE

 

CBRE have been operational in Scotland for more than 60 years, advising a wide range of clients in the private and public sector on property sales and leasing, facilities and project management, appraisal and valuation, development services, investment management and research. Our team in Edinburgh consists of over 40 professional and support staff.

One Lochrin Square brings 64,000 sq ft of Grade A office space to Fountainbridge. The 'defurbished' office building is home to trip.com and co-working hub Spaces.

How has Edinburgh's office market been performing, and why?

After a near record year of take-up in 2017 underpinned by some major transactions, a quieter 2018 was anticipated. However, by the end of Q3, take-up for the year at 784,114 sq ft had surpassed the 5 year average and it's likely we'll see another 1m+ sq ft transacted in 2018.

Attracting and retaining staff is of ever increasing importance and Edinburgh as a city to live and work in scores very highly across a range of measures. This drives occupiers towards the provision of high quality workspace which increasingly makes a relocation the most attractive option.

Coupled with a critically low level of supply, with just 1,294,413 sq ft available at the end of Q3 and a new build Grade A vacancy rate in the city centre of 0.5%, we’ve seen occupiers moving quickly to secure space in the knowledge that there isn’t much coming over the horizon. 

This dynamic has placed almost unprecedented pressure on headline rents both for Grade A accommodation and well located Grade B stock with £35psf now accepted for the best new space.

Capital Square (122,000 sq ft) is the only new build development under construction with available accommodation. However, with 55% of the space having been pre-let to Brodies and Pinsent Masons, only 54,000 sq ft remains. It can now be argued that a premium could be sought for any open plan space of over 10,000 sq ft.

We’re also now seeing the rapid growth of the serviced office market in Edinburgh from a low base. Spaces opened their first centre (45,000 sq ft) during 2018 and are already close to 100% occupancy. It's anticipated that We Work will open their first Edinburgh centre in 2019 and there are others queuing up to enter the market.

CBRE Scotland figures reveal office market activity in Edinburgh in the third quarter of 2018 was up 28% on the same quarter in 2017.

What does it mean for the city?

Edinburgh’s continued economic growth is dependent on the availability of accommodation that meets the needs of both the creative and financial sectors, the principal drivers of demand. That space is in short supply and this could have a real impact on the City’s aspirations in the next decade.

Those pulling the planning strings need to have a hard look at how to address this and how to deliver space where occupiers want it. That may mean building taller offices and it may mean developing new mixed use projects of scale, in locations outwith the city centre.

What's the outlook for Edinburgh's office market?

Will we see continued strong demand in 2019? The lack of stock and threat of Brexit could combine to suppress demand next year and we are already witnessing a slow-down in demand but the restricted development pipeline may force the hand of larger occupiers who may otherwise have delayed a decision.

 

If you would like to find out more about how we can help you and your business establish, relocate or expand within the city region, or would simply like more information about what Edinburgh has to offer, get in touch today.

E: invest@edinburgh.gov.uk

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E: invest@edinburgh.gov.uk

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