Make your business at home in Edinburgh

Published: 01 March 2016

This article featured in The European, during March and April 2016.

An interview with Andrew Kerr, Chief Executive, City of Edinburgh Council...

The city of Edinburgh has long been a centre for leading multinationals who have come to rely on its solid infrastructure, rich talent pool and superb quality of life. Yet, as the digital economy has evolved, so has Edinburgh and an increasing amount of the world’s most successful technology firms have also made a home in this historic city.

A key player in developing this success is The City of Edinburgh Council who see it as their job to be one step ahead and ensure the city continues to flourish as a location for investment in skills and enterprise. The European caught up with The City of Edinburgh Council Chief Executive, Andrew Kerr to find out more about what drives the city and also to throw the spotlight on Edinburgh’s burgeoning real estate sector.

Q: Please outline the type of opportunities available in Edinburgh for those eyeing commercial real estate investment in the UK?

AK: Edinburgh offers the full gamete of commercial real estate investment opportunities. For real estate investors seeking to acquire immediately income-generating assets, there are attractive opportunities relating to office, hotel, industrial and retail/leisure properties. For investors interested in more speculative opportunities, there are a number of mixed-use development sites throughout the city.

Q: For those unfamiliar with the city, what are the growth areas within the Edinburgh economy that make it such an attractive real estate proposition?

The robust performance of Edinburgh’s real estate market is underpinned by strong fundamentals: a resilient economy; a growing business base; a well-educated and well-paid population; and large annual in-flows of visitors and students.

The office market remains buoyant, with approximately 92,900m2 taken up in 2015. Demand is driving rental growth, with rents on prime properties projected to reach £366/m2 in 2016. Three flagship office developments totalling 53,500m2 are currently under construction in Edinburgh – two of them already fully pre-let – with work beginning on another four totalling 30,800m2 this year.

The booming technology sector is rapidly emerging as a leading source of office demand, with major lettings to FanDuel, FreeAgent, and Cirrus Logic, although the financial services sector – traditionally the primary source of demand – remains significant, with Standard Life Investments taking 10,000m2 at the South St Andrew Square development in the city’s largest pre-letting in over a decade.

This performance has attracted huge interest from real estate investors, with multiple major office transactions last year, including the sale of Scottish Widows’ headquarters for a record £105 million – a yield of 5.1%.

With occupancy rates averaging well over 80% (among the highest in Europe) and revenue per available room at an all-time peak, the hotel sector continues to fare well. The city’s tourism industry has been boosted by recent developments such as the expansion of Edinburgh Airport and the growing popularity of Edinburgh’s summer festivals. The city’s hotel pipeline comprises over 4,000 bedrooms. Recent hotel transactions have averaged 6.2% yields.

Student housing remains a popular investment proposition with typical yields of 6.5%. Around 80,000 students are enrolled in Edinburgh’s universities and colleges, with a rising proportion looking to live in purpose-built student accommodation. Last year, Zoopla named Edinburgh the UK's most attractive city for buy-to-let student landlords.

Finally, the city’s steady population growth means the residential sector remains attractive to investors. In the third quarter of last year, average rents reached £942 – a 7.5% year-on-year rise. In January 2016, the Council gave approval for Edinburgh’s first private rented sector (PRS) scheme, opening the way for large-scale institutional investment in this sector.

In 2014, the real estate advisory firm CBRE named Edinburgh one of the top mid-sized European cities for property investment, recommending that it had scope to deliver stronger returns than more mature markets. Meanwhile, the inaugural JLL City Momentum Index named Edinburgh one of the top 10 best performing cities in Europe based on socioeconomic and real estate momentum and long-term success factors. With continued uncertainty surrounding the global economy, we expect increasing numbers of investors to look to Edinburgh as a safe haven for capital.

Q: What kind of support can commercial real estate investors rely on from the City of Edinburgh Council?

AK: The Council’s City Strategy and Economy service can support real estate investors through signposting opportunities, facilitating introductions to key property industry contacts, assisting with ownership enquiries, and providing comprehensive data on catchments, market conditions and other considerations. The Council is particularly keen to engage with real estate investors interested in opportunities for the redevelopment or active management of underutilised assets.

Q: What makes Edinburgh unique to global companies looking for a UK R&D / administrative base?

AK: Edinburgh’s unique offer stems from the “boutique” nature of the city. Companies in Edinburgh have access to world-class connectivity, blue-chip suppliers, and a large supply of skilled workers while benefiting from competitive operating costs and a quality of life that attracts global talent. The appeal of a local labour pool that includes over 150,000 graduates and an airport serving over 100 destination worldwide from New York to Qatar, coupled with prime office rents less than a quarter of those of the West End of London, is obvious.

Edinburgh has all the attributes of a global centre of commerce while still retaining the liveability, compactness and character of a far smaller city. For companies looking for research and development facilities, Edinburgh has a large skills base – over 30,000 people work in science and technology – and four universities excelling in a broad range of scientific disciplines.

Among the blue chip companies selecting Edinburgh as an R&D hub are Apple, Amazon and Toshiba (software); Selex ES (avionics); Aviagen (poultry genetics); Renishaw (metrology); Macfarlan Smith (pharmaceuticals); Lockheed Martin (aerospace); and STMicroelectronics (semiconductors)

Q: A feature of the digital economy is the number of start-ups companies arriving on the scene. How does the office/commercial infrastructure in Edinburgh facilitate entrepreneurialism across the technology sector?

AK: The rapid growth of Edinburgh’s technology sector has translated to increased demand for office space, ranging from affordable, flexible, grade ‘B’ and ‘C’ space for early-stage firms to grade ‘A’ space in prime locations for blue chip firms. Helping meet the demand for low-cost space is CodeBase, the UK’s largest technology incubator. CodeBase provides affordable office space for over 60 tech companies such as training software provider Administrate, cyber security experts ZoneFox and DRTV analytics firm TVSquared. In addition to providing workspaces, CodeBase also offer mentorship, training programmes and a range of social and professional networking events.

Co-located with CodeBase is CodeClan, a new digital skills academy that offers an intense coding course that is producing a new cohort of talented entry-level software developers every 16 weeks, helping met the ever-growing demand for coders.

Another source of affordable space for tech companies is “Silicon Walk”, a business centre in Edinburgh’s East End home to firms such as videogame analytics specialist deltaDNA and appointment booking software specialist Appointedd. Among the former tenants of Silicon Walk are Mallzee, a fashion shopping app start-up that has now relocated to larger offices after securing funding for an expansion.

At the other end of the market, a number of modern developments have emerged as locations of choice for established technology firms, including Quartermile (home to Skyscanner, FanDuel and Cirrus Logic) and Waverleygate (home to Amazon and Microsoft).

Q: Discuss the importance of Edinburgh’s academic network in encouraging growth across the science and technology sectors.

Edinburgh’s academic strengths in software have helped with the emergence of a flourishing technology sector. The School of Informatics of the University of Edinburgh is the largest school of computing in Europe and one of the largest worldwide, with over 450 academics and 850 students. The University plans to construct a new Data Technology Institute capable of housing a further 700 people. The national Research Excellence Framework has found that the School of Informatics conducts more world-class research than any other UK university. The scale and calibre of the School of Informatics means that technology companies in Edinburgh have access to a regular source of high quality staff and intellectual property.

The Quartermile office development next to the School of Informatics is home to the technology “unicorns” Skyscanner and FanDuel, with Cirrus Logic due to join them later this year.

In life sciences, the relationship between academia and the technology centre is epitomised by the BioQuarter, an ambitious translational medicine project that brings together the Royal Infirmary of Edinburgh, the University of Edinburgh's Medical School and, from 2017, the Royal Hospital for Sick Children on a single site, together with the Scottish Centre for Regenerative Medicine, Queen's Medical Research Institute and “Nine”, a business incubator for life sciences firms. In total, the BioQuarter brings together over 1,200 researchers with specialised resources such as a clinical trials unit and imaging centre.

The critical mass of research expertise at the BioQuarter has given rise to fruitful collaborations such as a partnership between the University of Edinburgh and global pharmaceuticals giant GlaxoSmithKline that has yielded an effective treatment for preventing organ damage from acute pancreatitis.

Initiatives such as the annual Edinburgh BioQuarter Innovation Competition – which awards grants to help University of Edinburgh and NHS Lothian employees commercialise ideas – have helped foster new life sciences start-ups and spin-outs. Those are just two examples and the city’s universities are highly active partners with industry across a range of disciplines.

Queen Margaret University has created the Scottish Centre for Food Development and Innovation as a one-stop-shop for food and drink manufacturers looking to access expert support, while Edinburgh Napier University has created “expert centres” to serve as a gateway for academic support in fields such as geotechnics and timber engineering. Heriot-Watt University has created a research park on its Edinburgh campus reserved for technology companies looking to collaborate with the University.

In addition to research and graduates, Edinburgh’s universities also directly add to the city’s company base through spin-outs. The University of Edinburgh alone has spun-out over 400 companies in the past 40 years. Among the companies spun-out in recent years are PureLiFi (University of Edinburgh), which is pioneering “Li-Fi” as a super-fast alternative to Wi-Fi; Celtic Renewables (Edinburgh Napier University), which has developed a process for converting whisky by-products into biobutanol, a petrol substitute; sound technology firm Krotos (University of Edinburgh), which provided sound effects for the blockbuster film Avengers: Age of Ultron; and biotechnology firm Nandi Proteins (Heriot-Watt University) which provides proteins as a natural, healthier alternative to additives to clients such as food and drink giant Tate and Lyle.

Q: Please outline any key initiatives implemented by the City of Edinburgh Council to ensure the city continues to attract both leading multi-nationals and the best emerging talent.

The Council’s City Strategy and Economy service offers “soft landing” assistance to companies investing in Edinburgh. This comprises a suite of services including access to free flexible work-spaces in Edinburgh city centre for the core management team during the development phase of the project; a single point of contact for all enquiries relating to Council services; advice on property options; signposting grants and loans; introductions to key organisations in the local business ecosystem; market research; and assistance with publicity and promotion.

Employees relocating to Edinburgh can access assistance with practicalities such as locating a place to live and registering any children with a school. The City Strategy and Economy service can also provide businesses with a comprehensive outsourced recruitment service: marketing job opportunities; filtering and vetting candidates; and holding pre-recruitment workshops to prepare and brief candidates.


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