Edinburgh’s office market was the most active it has been for 16 years in 2017, with well over 1 million sq ft of space leased by occupiers in 12 months, according to property consultancy JLL.
Over 1,100,000 sq ft of office space was transacted in 2017 – a 40 per cent jump in activity compared with the final year-end take up in 2016 – and the first time the million mark has been surpassed since 2001. JLL were involved in 50 per cent of all deals in Edinburgh in 2017.
Total occupier take up in 2017 reached this significant milestone following a number of large transactions. The largest deal of the year, the UK Government’s decision to locate its HMRC hub to Edinburgh, generated a 186,500 sq ft pre-letting at New Waverley which will house 2,900 civil servants by 2020.
Other notable deals include Standard Life Aberdeen taking 69,000 sq ft at 10 George Street and State Street leasing 65,628 sq ft at Quartermile 3.
Edinburgh’s reputation as an attractive destination for tech firms continued to grow, making up over 20 per cent of all take up. Australian financial firm Computershare took 41,395 sq ft at 4 North and fin tech firm Nucleus Financial moved into 18,750 sq ft at Greenside.
The year’s four largest deals were all pre-lets, highlighting the critical supply dynamic in the city. At the end of 2017, the vacancy rate had dropped to 3.8 percent, down from 4.8 percent at the same point in 2016.
But with a lack of speculative office developments in the pipeline, Cameron Stott and Ben Reed, Directors at JLL, expect 2017’s record breaking take up to be difficult to repeat due to a number of conflating factors:
Cameron Stott commented: “Regardless of any political uncertainty, it remains certain that supply of office space in the capital will remain extremely tight. In terms of new supply, only three new developments are on site to be delivered over the next three years, including Semple Street in 2018 and the Mint Building in early 2019. A key trend, which we are seeing more of, is the demand for refurbished properties. Last year saw the successful opening of One Lochrin Square and the refurbishment of 4 North is due to complete this year before Computershare move in to the building. Later in 2018 we will see NFU complete the refurbishment of 80 George Street creating 40,000 sq ft of much needed Grade A supply.
“Edinburgh’s growth as a major commercial centre is severely hampered by a lack of new office space. Put simply, as demand continues to accelerate, supply has failed to keep pace. If the lack of speculative office development persists, it could act to limit the pace of economic growth and inward investment in Edinburgh.”
Ben Reed commented: “In 2017, we once again saw TMT occupiers encroach on the traditional office market, counting for over 20 per cent of all deals in the city. Over the next 18-24 months we expect this percentage to increase as TMT occupiers take a greater share of the market. To satisfy this demand we will see an increase in availability of coworking space across the City. Coworking is centred on creating space which supports collaboration, openness, knowledge sharing, innovation and the user experience. Whilst traditionally favoured by start-ups and entrepreneurs as a flexible and collaborative working solution, coworking is being adopted by a growing number of traditional blue chip businesses keen to explore how to incorporate the concept into their real estate strategy, to take advantage of burgeoning innovation as well as talent attraction and retention.”