OFFICE occupier take up in Edinburgh during 2014 had its strongest year for a decade, despite the Referendum, according to new research by JLL.
Approximately 875,000 sq ft was transacted during the full year, up 13 per cent from the previous year’s total of 773,000 sq ft. The total take-up for 2014 is at its highest level since 2004 and significantly above the five year average of 650,000 sq ft.
The stellar year for take-up had two major contributing factors. The final quarter of the year was up more than 100 per cent over the previous quarter, Secondly, the pre-letting of 108,000 sq ft at 6 St Andrew Square to Standard Life Investments was the largest of its kinds in more than 10 years.
Whilst Financial Services drove a lot of the activity, the City also benefited from the growing strength of the TMT sector which is anticipated to continue into 2015. The development market has also reacted with three new offices schemes commencing on site in 2014, with others anticipated to follow this year. There is no new development completing in 2015.
Other major transactions in Edinburgh during the year included the letting of 75,514 sq ft to Rockstar at Barclay House, 26,600 sq ft to Codebase at Argyle House, 25,555 sq ft to the Scotsman for its new Head Office at Orchard Brae House on Queensferry Road and 20,600 sq ft to Zonal Data Retail Systems at Tanfield.
JLL was involved in 48 per cent of all transactions across Edinburgh.
Predictions for 2015
Looking ahead to 2015, JLL predicts the following significant trends over the coming year that will shape the office occupier market:
1. The lack of immediately available new Grade A supply has become more acute and we therefore anticipate further pre-letting activity. The vacancy rate for this type of accommodation is currently under 1 per cent.
2. The market is likely to be skewed in favour of landlords, especially in the city centre. As a result of current market dynamics, we will see rental growth whilst tenant incentives continue to decrease.
3. We will see a ripple of occupier movement out to West Edinburgh over the next couple of years due to a shortage of supply in the city centre until new development completions come on stream during 2016.
4. There are only three new developments currently under construction, 6 St Andrew Square which has already been pre-let, The Haymarket and Quartermile 4, with the earliest due for completion in Q2 2016. These developments will deliver more sustainable offices which are capable of greater occupancy densities.
5. Letting activity will centre around transportation hubs including Haymarket, Waverley and the re-emergence of Edinburgh Park. Quartermile has also now gained critical mass and a good tenant mix particularly attractive to the TMT sector.
Ben Reed, Regional Director at JLL said, “The levels of occupier activity during 2014 really underline the buoyancy of Edinburgh’s local economy, following several years of volatility. The final quarter, in particular, witnessed a significant increase in activity, with some indication that the figures were boosted by occupiers who were waiting until the outcome of the referendum before making property decisions. What’s clear going forward is that occupiers with lease events in the next two years will have far less choice than they have had for a number of years and therefore need to get advice and a strategy in place quickly.”
