Scotland’s commercial property sector could face long-term growth issues if demand for office space continues to outstrip supply.
Leading business and financial advisor, Grant Thornton, is warning businesses could be forced to look elsewhere if the availability of grade A office space continues to decline.
In Glasgow, no major new tenant-free office builds are expected to become available until late 2019, prompting fears that wider political and economic uncertainty has led to developers holding back on new projects, despite rising rents and a growing appetite from businesses for higher quality office-space.
The latest statistics from property consultants Knight Frank suggest prime headline rents in Edinburgh hit record levels last year, rising by 6% to £33 per square foot. In Glasgow, rents increased by 2% to reach £30 per square foot. Current market predictions suggest both cities could see rents rise by more than £2 per square foot by the end of 2017. In Aberdeen, the recent oil and gas downturn has reduced rents in the city to around £32 per square foot. However, a gradual recovery in market conditions in the north east could leave the granite city facing similar changes to central Scotland.
Lorraine Macphail, Head of Property and Construction at Grant Thornton in Scotland, said:
“Rising demand for prime grade-A office space in Scotland is clearly a positive sign that the country’s economy remains resilient and focused on growth. But, a complete lack of suitable accommodation in our major cities could have significant consequences. The main issue appears to be developers and funders holding back on major new speculative builds thanks, at least in part, to growing national and international political and economic uncertainty.
“What’s now needed is greater collaboration between political and industry leaders to tackle the immediate issue of office availability, but also to explore how we prevent accommodation shortages from becoming a chronic challenge that inhibits long term, sustainable growth.”