Glasgow’s office market saw a robust level of activity in 2016, despite political and economic uncertainty, according to analysis from Knight Frank.
The firm’s figures for the previous 12 months show there was 689,000 sq. ft. of take-up across the city, well above the five- and ten-year averages of 543,000 sq. ft. and 616,000 sq. ft. Even when Morgan Stanley’s 150,000 sq. ft. pre-let of 122 Waterloo Street is excluded, the year’s take-up remains strong – on par with the five-year average.
Glasgow saw a number of high-profile deals conclude in 2016, with insurer AXA securing 50,000 sq. ft. at the Cuprum building; serviced office provider, Regus, taking 30,000 sq. ft. at Tay House; drinks group, Edrington, moving its worldwide HQ to 100 Queen Street by acquiring 29,890 sq. ft.; and accountancy body, ACCA, letting 56,000 sq. ft. at neighbouring 110 Queen Street – the latter building is now fully occupied.
High levels of demand, coupled with a lack of supply, have seen the amount of available Grade A space decrease to 120,000 sq. ft., with no new-build stock available for at least the next two years. Knight Frank said that all of the remaining Grade A space was likely to be let in 2017, with 550,000 sq. ft. of active requirements still on the market.
Colin MacKenzie, Office Agency Partner at Knight Frank in Glasgow, said: “Glasgow’s office market has been remarkably robust in the face of an uncertain 12 months – testament to the city’s solid fundamentals and its healthy business landscape.
“There are a number organisations looking for space and, although that’s typically the case at the end of Q4, it still bodes well for the first half of the year. There are also a number of significant deals that have carried over from 2016, which could make the beginning of 2017 an active quarter.
“That being said, the next 12 months are likely to be characterised by insecurity, as political factors take their toll. That will undoubtedly make decision-making a more protracted process for businesses; however, many organisations in Glasgow will need to move premises or re-gear in the short-term, regardless of outside factors. Whichever option they choose is likely to see rents increase in many of the city’s commercial properties.”
Sarah Addis, Senior Surveyor at Knight Frank in Glasgow, added: “With so little Grade A space available and demand remaining stable in Glasgow city centre, we’ve begun to see a blurring of the lines between Grade A rents and some of the new Grade B refurbishment schemes, the gap between them has begun to narrow, with rents achieved in the latter pushing on.
“Deals, in the last 12 months, have tended to be characterised by occupiers acquiring less, but more functional space. Occupiers are also looking at different types of stock and collaborating with landlords to find ways of making properties work for them – for example, through the installation of interconnecting stairwells, where it hasn’t been possible to accommodate a business on a single floor.”