Take-up of Edinburgh office space remained robust in Q3 2016, despite the uncertainty caused by Britain’s decision to leave the European Union, according to analysis from independent real estate consultancy Knight Frank.
Scotland’s capital saw 120,000 sq. ft. let across the city during July-September 2016; down on the first two quarters of the year, but broadly in line with the same period in 2015 (148,000 sq. ft.).
Technology, media, and telecommunications (TMT) companies continued to drive activity in the market, accounting for 49,000 sq. ft. of Edinburgh-wide take-up– 40.83% of the total.
Demand for Grade A space also remained voracious in the city centre, with 176,000 sq. ft. already let in the year to date. This puts the capital on course to outperform the 220,000 sq. ft. 10-year average for annual city centre, Grade A office take-up by the end of 2016.
Simon Capaldi, Associate at Knight Frank, said: “Despite Q3 tending to be the slowest period of the year, if all the deals currently in legals and under offer conclude, we could be looking at another strong year for Edinburgh – approaching the 800,000 sq. ft. mark and well above the 10-year average. To have two strong years back to back shows the level of confidence that is pumping through the city, with the TMT sector leading the way.
“Insatiable demand for Grade A stock has continued across the capital and, with supply failing to keep up, availability is diminishing. This trend looks likely to continue, with only one speculative development currently underway in Edinburgh and little else in the pipeline.
“There is a good level of requirements in the market, particularly for sub-5,000 sq. ft. accommodation. The level of demand should give developers the confidence to start building. Many will be holding out for pre-let opportunities and, although there have been few in the last decade, we’d expect to see more announced towards the end of 2016.”
With so little new-build developments due for completion prior to 2018, a number of landlords have looked to refurbish their existing stock. One Lochrin Square, located in the heart of Edinburgh’s Exchange District and the former site of Scotmid’s HQ, is one example of this trend, and is likely to become available at the end of the year.
Knight Frank, which is joint agent on the property, said that One Lochrin Square would be the only self-contained building of its size, quality and scale to reach the market for the next 12 months.
Toby Withall, Office Agency Partner at Knight Frank, said: “Grade A space is fading in Edinburgh, with availability at lows we’ve not seen for some time. One Lochrin Square will provide some welcome supply for occupiers in the city – albeit, we expect competition to be very fierce.
“Any organisations with a lease event in the next year will have to think very carefully about their options. With a super-prime rent of £33 per sq. ft. achieved at Atria, and Grade A rents across the city centre reaching £29-£30 per sq. ft., many will be priced out of the market and forced to consider accommodation on the city’s periphery – with the west of Edinburgh, in particular, likely to be the beneficiary.”
