Glasgow and Edinburgh, along with other regional office markets, have boasted on trend take-up over Q2, with activity skewed towards larger deals and city centre markets according to the latest Big Nine update from Avison Young.
The key office letting deal in Glasgow city centre during Q2 was to hotel chain Hilton taking 41,665 sq ft of offices at the recently refurbished 191 West George Street. There were also two c.20,000 sq. ft transactions to artificial intelligence company ARM and JP Morgan Chase. Clydesdale Bank, which took a pre-let of 110,000 sq ft at 177 Bothwell Street last year, has taken a further 13,000 sq. ft at Granite House, 31 Stockwell Street.
There is 1,054,000 sq ft under construction in Glasgow, including Atlantic Quay, Buchanan Wharf and 177 Bothwell Street. Of this, 767,000 sq ft is pre-committed (Barclays, Clydesdale and GPA) and 287,000 sq. ft is available, although discussions are already taking place with occupiers for this space.
Headline rents have remained at £32.50 per sq ft, although the current scarcity of grade A availability means that secondary/ grade B headline rents have also increased, and combined with reducing rent free periods, net rental growth in this sector continues to accelerate.
Alison Taylor, Principal and Managing Director for Avison Young Glasgow, said, “While take up during Q2 at 151,000 sq. ft was on par with average quarterly take-up, H1 take up in comparison to 2018, is down significantly on last year. However, we expect this to pick up in H2 given the large number of refurbishments and transactions underway in the city.
“The demand for Grade A remains robust with some sizeable unsatisfied requirements circulating the market from the tech sector, professional services, corporate sector and the public sector all in advanced discussions, despite the uncertainty around Brexit.”
The report reveals that Edinburgh was only one of two regions where there was a heavy skew of overseas investment, totalling circa £200 million each. This can be demonstrated by the purchase of the mixed use 4-8 St Andrew Square by KanAm Grundinvest Fonds for c £120m.
The trend towards flexible workspace deals has also continued and this has been echoed by the Edinburgh market where the most significant deals in the market were to co-working companies. WeWork took 40,500 sq. ft at 80 George Street in the city centre and Instant Offices took 35,600 sq. ft out-of-town at Broadstone in the Gyle. WeWork are also understood to be looking closely at the Glasgow market.
Stuart Agnew, Principal and Managing Director Edinburgh, said: “UK real estate remains a ‘safe haven’ asset and overseas investors continue to benefit from the weakened currency.”
“With the Brexit deadline approaching, investment volumes may improve for the 3rd quarter of 2019 as deals are accelerated prior to the 31st October dead-line and then, dependent on the outcome, the final 2 months of the year could be perceived as an opportunity to recover from the below average levels of activity experienced in the first 2 quarters. In addition, the limited supply of prime investment opportunities is also suppressing activity but we are witnessing very strong demand for those prime opportunities that are available with a number of large transactions being agreed on an off market basis.”