Demand for office space in Britain’s regions helped boost take-up to its highest level since the start of the downturn, according to CBRE, the leading commercial property and real estate services advisor.
Across nine key regions 6.35 million sq ft was transacted over 2014 – the equivalent of 83 football pitches. This is up 15% on the total amount of office take-up during 2013 (5.51 million sq ft) and over a third more (38%) than the five year annual average of 4.60 million sq ft.
Aberdeen
Office take-up in Aberdeen totalled 1.03 million sq ft in 2014 – growth of 44% compared to the previous year. This was boosted by the second largest occupational deal in 2014 anywhere in the UK with Aker Solutions’ pre-let of 335,000 sq ft at Aberdeen International Business Park.
However in Aberdeen the second half of 2014 was characterised by a steadily falling oil price. This resulted in leading oil companies reviewing costs and making some cuts, which is likely to affect office market activity in 2015.
Following a long shortage of Grade A space, speculative construction is now beginning to commence in Aberdeen. Dandara’s The Point (80,000 sq ft) and Knight Property’s The Capitol (74,000 sq ft), both city centre schemes, are now on site and are due to complete in 2015. Titan Investors’ Silver Fin building (132,000 sq ft) and Muse’s Marischal Square scheme (173,000 sq ft) are also expected to commence on site this year.
Gordon Pirie, associate director in the Aberdeen office, commented: “Take-up in the second half has been exceptionally strong, largely due to the Wood Group and Aker Solutions lettings. There have also been significant pre-lets to PD & MS Energy, DOF Subsea and Statoil, showing that Aberdeen has continued to experience a strong pre-let driven market.
“We’ve seen further rental growth with prime rents moving from £31.50 per sq ft to £32 per sq ft. The new speculative schemes in the city centre may also set a new rental benchmark for Grade A space in Aberdeen.”
Edinburgh
Take-up of office space in Edinburgh in the second half of 2014 was 411,923 sq ft, taking the full year total to 873,072 sq ft. This was up 18% for the same period in 2013 and represents the highest annual total in Edinburgh since 2004. Standard Life’s 108,564 sq ft deal at St Andrew Square at the end of 2014 significantly boosted the total figure.
The amount of ready-to-occupy space in Edinburgh fell for the third year in a row in 2014, with just 439,500 sq ft of newly completed space available. This was down 60% since the supply peak of 2009. With levels expected to fall further in 2015, overall supply in the city is set to become the lowest since 2004.
The Standard Life pre-let at St Andrew Square will give those developers considering speculative development further encouragement with Quartermile 4 now the only speculative scheme under construction. The Haymarket development is likely to be the next project on site with an estimated start date of later this year. There are other proposed developments such as Capital Square at Morrison Street, New Waverley, Fountainbridge and a further building at Quartermile, but none have definitive start dates.
Stewart Taylor, senior director in the Edinburgh office, said: “The long anticipated letting of 6 St Andrew Square has moved the market on to the next chapter and, with one foot still resting on the supply pipeline, further pre-lets will happen this year.”
Investment activity picked up in Edinburgh following the ‘no’ result of the independence referendum and transaction volumes were ahead of the long term average. The key deal of the year was the sale of Port Hamilton, the Scottish Widows HQ on Morrison Street, which accounted for over a third of all investment activity in 2014.
Glasgow
Glasgow enjoyed a strong second half of the year with a number of large deals taking place in the city centre; the largest of which saw Network Rail acquire 48,570 sq ft of space at 151/155 St Vincent Street in addition to a further 20,525 sq ft at George House. Total take-up reached 403,630 sq ft in H2, bringing the 2014 total to 671,937 sq ft.
Despite 470,000 sq ft of new space due to be delivered in the first half of 2015, overall supply levels have continued to fall in Glasgow, particularly on new and early marketed space. However the level of pre-letting taking place means the overall impact on supply levels in 2015 will be minimal.
Audrey Dobson, senior director in the Glasgow office, said: “2014 was a stellar year for the Glasgow office market. Concerns that uncertainty surrounding the Scottish referendum would negatively impact occupier sentiment were unfounded with total take-up reaching almost 672,000 sq ft. The strength of occupier demand and the reduction in available Grade A and B floor space bodes well for a reduction in tenant incentive packages and rental growth during 2015.
“The huge success of the Commonwealth Games and the Ryder Cup during the summer raised the profile of both Scotland and Glasgow. The Games in particular were very positive in showcasing the city to the world and will only assist in attracting inward investment in 2015.”