According to the latest research from CBRE Scotland, the total office market take-up in Glasgow in the fourth quarter of 2017 was 330,061 sq ft, resulting in 631,814 sq ft of office space transactions across the whole year.
Andy Cunningham, senior director in CBRE’s Glasgow office, commented: “With a strong total take-up for the year the Glasgow office market has performed well, particularly when you consider the 5-year average annual take-up is normally around 550,000 sq ft. Notable deals include DWP taking 84,542 sq ft at 1 Atlantic Quay and Scottish Courts & Tribunals acquiring 80,498 sq ft at 3 Atlantic Quay.
“However Glasgow is suffering from a severe shortage of ready-to-occupy Grade A space with only 61,026 sq ft remaining available on the market. With no speculative funding to develop we could be facing a challenge with attracting new inward investment and retaining the city’s businesses. There is also a considerable time lag for building new offices to be delivered, particularly when you require approximately twelve months for all necessary statutory consents and then approximately 30 months for an average construction period. This will put pressure on rents for new build Grade A space in order to keep up with costs which could create the conditions for a new headline rent in the city moving forward.
“Developers with credible office development sites still need to satisfy occupiers over concerns such as ownership structure, vacant possession, planning, technical skills and track record to complete high quality space within the set programme. With the market not responding to tenant demand, there is a real potential for pre-lets to be agreed.”
There also remains a significant amount of Grade B space on the market with approximately 1.2million sq ft across varying floor plate sizes and specifications. Functional obsolescence is a major barrier to letting some of this space however the 0-5,000 sq ft sector is still the most active in the Glasgow market.
Andy Cunningham continued: “The future of the Glasgow office market will see change with demand for more flexible leasing solutions increasing in popularity. Previously Glasgow was a very immature market for this product but with new entrants like We Work, Spaces, Managed Office Solutions, Orega and iHub reviewing the Scottish market, it is starting to gather some real momentum. Developers need to take notice of this new trend as boring, institutional office space is being viewed by some occupiers as bland. It will be interesting to see how developers and more importantly, investors, respond to this changing market dynamic.”