finance

Glasgow and Edinburgh city centre markets see highest take-up in over 18 months


Total office space take-up during the second quarter in Glasgow city centre was 142,821 sq ft – down 13% on the 10-year average, but the highest since the beginning of 2020.

Meanwhile, Edinburgh city centre saw the largest number of deals since the fourth quarter of 2018, with take-up amounting to 137,705 sq ft – only marginally down on the 10-year average by 4%.

Property advisor Avison Young’s latest analysis showed that flexible workspace deals in Glasgow are returning to the regional markets and accounted for the largest deal of the quarter – 35,787 sq ft to Instant Managed Offices, courtesy of DWP at 200 Renfield Street.

BNP Paribas has taken the 20,700 sq ft first floor of 177 Bothwell Street at a headline rent of £34.50 per sq ft, while the top floor of Cadworks is under offer and 20,000 sq ft is under offer at 2 Atlantic Square. Both deals are expected to conclude in the third quarter.

There remains a healthy level of new requirements, according to Avison Young, with the Cabinet Office looking for between 20,000 sq ft and 40,000 sq ft, engineering company Aecom requiring 25,000 sq ft and power supplier Aggreko looking for 15,000 sq ft.

Grade A space within the Glasgow remains at a premium, with only 6,500 sq ft currently on the market, but just over 200,000 sq ft of speculative new build accommodation will complete during the rest of 2021 – much less than current occupational demand requirements.

Paul Broad, director at Avison Young Glasgow, said: “Office occupiers are on the move in Glasgow and there is a clear appetite to reshape and reconfigure office occupation in the city.

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“While there is still some uncertainty over space requirements many occupiers are looking to hybrid styles of working, which will rely heavily on improved technology for meeting solutions, it’s an extremely exciting time to be leading an office agency business, seeing all the new innovations.

“However, there continues to be a divergence of views on the extent to which workers will return to the office, ranging from a complete return to a fully flexible working policy – as a result, flexible workspace deals are returning to the regional markets and accounted for the largest deal of the quarter in Glasgow, and we expect to see a further increase in activity once the Scottish Government announces a return to office working.”



Paul Broad, director at Avison Young Glasgow
Paul Broad, director at Avison Young Glasgow

In Edinburgh, the largest deal of the quarter was an assignment to fintech company FNZ of 20 West Register Street, from Baillie Gifford, which originally pre-leased the building.

The public sector has been the most active sector this year, after the Nursing and Midwifery Council took 11,353 sq ft at 10 George Street, and Scottish Ministers acquired three floors at 20 West Register Street (28,728 sq ft).

Availability in the city centre has been slowly increasing since its cyclical low two years ago. This is more a reflection of the completion of new buildings such as Capital Square (54,398 sq ft vacant), rather than occupiers flooding the market with surplus space post Covid-19.

The out-of-town market is starting to see more activity following a lacklustre 12 months and Avison Young expects to see an improvement in requirements later in the year due to the lack of availability in the city centre.

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Peter Fraser, director at Avison Young Edinburgh, said: “There has been a big increase in enquiries and viewings in recent months, as well as a number of pre-let discussions.

“The general focus is on prime and well refurbished accommodation – a clear indication that occupiers are concentrating on best-in-class buildings and ESG matters as they look to encourage their staff back to the office following the past 18 months of home working.

“Despite out-of-town activity remaining slow in the first half of the year, we see prospects improving sharply as we approach the end of the year – in part driven by the lack of larger floorplates and rising rents in in the city centre, but also as a number of building refurbishments are due to complete in the area. All in all, it’s clear that things are now looking much brighter in Scotland’s capital.”

Separately, Savills has reported that total investment into Scottish commercial property during the first half of 2021 reached more than £770m, reflecting a 62% increase on the figure recorded for the same time period last year.

In addition, the property advisor noted that with a further £490m currently under offer, the year end investment figure for Scotland is on track to meet or even surpass the pre-Covid levels of £2.62bn recorded in 2018.

Nick Penny, investment director and head of Savills Scotland, commented: “These half year figures are hugely encouraging and demonstrate how the pent up demand from last year is beginning to generate activity in the market, which will boost confidence as we enter into the second half of the year.

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“While we haven’t had a huge amount of available stock in the market, investor appetite is increasing and we have seen pricing remain strong for quality assets.

“Private equity and overseas investors have been the dominant buyers in the market so far this year, despite the restrictions that the pandemic has generated – we expect overseas appetite to increase further as travel constraints begin to ease, particularly with Scotland continuing to offer good value.”

Savills also reported that the office sector accounted for nearly 40% of total investment volumes in Scotland at £295m, with Edinburgh accounting for 36% and Glasgow 27% of that.

Despite the large volumes of available capital for the industrial sub-sector, only £82m (11%) was recorded in the industrial sector, although Savills stated this is down to a lack of stock, as opposed to a lack of investor appetite.

Stuart Orr, investment director at Savills Glasgow, added: “We expect offices will continue to dominate investment volumes in Scotland for the remainder of the year as the supply and demand story and consequential rent growth is so strong in both Edinburgh and Glasgow.

“The near insatiable appetite for industrial and logistics will likely be frustrated by the lack of stock, which will continue to harden pricing in that sector – as a result we anticipate some of that capital will shift to retail warehousing, which I expect will have a strong second half.”

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