This article was published on the City A.M. website on 13 February 2017 as part of Invest Edinburgh Talk.
Fuelled by record demand for high-quality office space, a thriving visitor economy, international student appeal and an attractive quality of life, it’s no wonder Edinburgh attracts developer interest from around the globe.
Edinburgh’s commercial property market remained buoyant in 2016. That strong performance followed an exceptional 2015, in which office deals were the highest on record for 15 years.
One the key trends driving this unprecedented demand is the rise of the Technology, Media and Telecommunications (TMT) sector, complementing the city’s traditional strength in financial services. In total, 184 office occupier deals spanning 72,400m2 were completed in 2016.
“The TMT sector has performed exceptionally in the last 12-18 months,” explains Simon Capaldi, Associate at Knight Frank. “To a large extent, that’s helped by the quality of the workforce we have in Edinburgh, and the type of courses now being offered across the city’s universities. It’s no coincidence that tech unicorns such as Skyscanner and Fanduel, as well as CodeBase, Europe’s largest tech accelerator, are all within walking distance of the University of Edinburgh’s world-class School of Informatics.”
Edinburgh’s start-up community is thriving. In 2016, the city was named as the Best European city for technology businesses to locate to by the European Business Magazine. The city’s cost base is approximately 30% cheaper than London, and Edinburgh continues to top surveys as one of the best cities in the UK in which to live.
Attracted by the city’s strong economic performance and a weaker Sterling, international investors are drawn to Scotland’s capital, which remains competitively priced compared to competitor cities, with prime yields standing at 5.5%.
Traditionally, between 40 – 60% of investment in the capital’s office market has come from overseas. However, research from Savills found that overseas buyers invested £310m into the market in 2016, representing 73% of total investment.
German-based funds have been particularly active, with Deka Immobilien and TRIUVA acquiring Atria (£105m) and Waverley Gate (£63m) respectively, while UBS Asset Management has delivered the refurbishment of One Lochrin Square.
City centre place making
Edinburgh’s appeal is further boosted by a number of large-scale mixed-use developments such as Edinburgh St James, one of the largest regeneration projects currently underway in the UK. The 158,000m2 scheme will deliver around 79,000m2 of retail and leisure space, a luxury W Hotel and up to 150 new homes.
Retail demand is expected to be high, target retailers include boutique and independent stores, high street and aspirational brands, as well as international retailers looking to expand into the UK.
International appeal also lies at the heart of Edinburgh St James’ residential offer. Apartments will offer unrivalled views across the capital’s skyline, which will be in high demand from a diverse range of buyers.
Complementing this is Chris Stewart Group’s redevelopment of West Register Street. Combining more than 1,400m2 of ground floor restaurant and bar space together with 5,700m2 of new grade A office and more than 50 serviced residential apartments.
Delivering a new urban quarter
To the west of the city centre, tHe Haymarket Edinburgh also has a bold vision to deliver a new, vibrant urban quarter for central Edinburgh around the city’s West End and tram interchange at Haymarket railway station.
Edinburgh Haymarket Development Ltd, will deliver more than 31,600m2 of Grade A office space, as well as more than 5,000m2 of retail and leisure space. With pre-lets signed with Staycity and Premier Inn, as well as a key retailer, the initial focus will be on leisure and retail.
However, detailed discussions are underway with potential office occupiers for the flagship 18,600m2 Number 1 Haymarket and Number 5 Haymarket, the prominent building adjacent to Haymarket station.
Edinburgh is a spectacular city. It has all the fundamentals of a vibrant, thriving global city. Combining financial services, tech and fintech industries means Edinburgh packs a huge punch. But world class businesses need world class accommodation.”Richard Powell, , Edinburgh Haymarket Development Limited
Getting the balance right
Looking to the future, Edinburgh needs to meet the expanding needs of its thriving technology scene, one of the fastest growing tech clusters in Europe, while continuing to support a robust financial services sector.
David Cooper, Service Manager – Development within the City of Edinburgh Council’s Economic Development service says “Edinburgh’s appeal is clearly evident in the strength of the city’s economy and property market. The city centre has historically performed well and we need to continue to find ways of supporting development across all sectors in order to meet the needs of a growing capital city.”