Scottish Office Market showing resilience but volumes are down

Subscribe to our newsletter

To be updated with all the latest news, offers and special announcements.

Large Government Property Unit (GPU) requirements and improved stability in the price of Brent Crude Oil will drive full year Scottish office take-up volumes above the 10-year average of 2.1 million sq ft, according to the latest report from Savills. However, the firm warns, despite a strong occupier market, investment into Scottish offices is falling due to a lack of stock coming to the market.

The firm’s latest Scottish Office Market Spotlight reports take-up reached 393,000 sq ft (36,509 sq m) during the third quarter of 2017, in what is usually a quieter quarter, taking total volumes year-to-date to 1.8 million sq ft (167,220 sq m).  Aberdeen has recorded 325,000 sq ft (30,194 sq m) of take-up so far this year of which over 50% involved oil and gas related industries. In Edinburgh take-up volumes have surpassed 970,000 sq ft (90,113 sq m), 9% ahead of the five year annual average, while in Glasgow 539,000 sq ft (50,073 sq m) of offices have been absorbed with a further 180,000 sq ft (16,722 sq m) pre-let at Atlantic Square by the Government Property Unit (GPU) as part of its national relocation plan.

Edinburgh is the only Scottish city with office developments under way however, despite this activity, Savills says there is only enough availability for one year of Grade A take-up at current levels. Conversely, in Aberdeen, despite the increase in take-up, availability rose to 2.6 million sq ft over the past quarter, largely down to the practical completion of Marischal Square and The Silver Fin Building.

Dan Smith, director in the business space agency team at Savills in Aberdeen, comments: “With Brent Crude oil having remained constant at $50-$55 per barrel during the third quarter of 2017, our forecast for the city’s full year’s take-up has now been revised upwards to 400,000 sq ft. While we have seen new buildings come to the market in the last quarter, we believe supply has now peaked and, with no more speculative developments in the pipeline, we expect rents for the very best space to remain in the region of £30 per sq ft. Incentives will continue to be challenging for landlords.”

Savills says that, despite a strong occupational market, a lack of on-market investment stock – as landlords look to hold onto long income – has resulted in investment volumes falling 9% below the 10-year average for this stage in the year (£375 million invested year to date). The firm reports 75% of all investment deals have been agreed off market, which demonstrates the increasing competition among purchasers for well-let assets.

Stuart Orr, director in the investment team at Savills in Glasgow, says: “Healthy levels of demand for commercial assets is being driven by an ever-increasing pool of overseas investors targeting Scotland, and green shoots of renewed confidence amongst UK funds. Perhaps our biggest concern is a lack of stock which, up until now, has been hampering investment volumes.”


Related News