EDINBURGH recorded the second highest level of office take-up among the UK’s ‘Big Six’ cities in 2014.
Levels reached almost 900,000 sq. ft. – the highest seen in the Scottish capital for 10 years – according to the latest research revealed by JLL at its ‘Big 6’ office market seminar held in Edinburgh.
2014 was the best performing year for the ‘Big Six’ markets, comprising Birmingham, Bristol, Leeds, Manchester, Glasgow and Edinburgh, with office take-up totalling five million sq ft. According to JLL, 1,080 big 6 office transactions completed last year, a 25% increase compared to the previous year, and there was a 43% rise in the number of deals over 10,000 sq ft in size
Edinburgh in 2014
· Overall, the market remained strong over the year and occupier demand held up despite the uncertainty of the referendum.
· The most notable transaction over the year was in Q4 with Standard Life pre-letting over 100,000 sq. ft. in St Andrew Square, with Rockstar Games’ lease of 75,000 sq. ft. in Barclay House the highlight of H1.
· Significant occupier demand drove increased take-up in the city which, in turn, has seen the rise of prime rents which now stand at £30 per sq. ft., in line with the UK regional office average. This highlights both the scarcity of prime space and robust demand from occupiers.
· Investment activity in Scotland was robust over the year, despite a subdued period in the run up to September’s referendum. Overall, office investment volumes in Edinburgh totalled just over £300m, comfortably above the 5 year average.
Cameron Stott, Director of Office Agency for JLL in Edinburgh, said the volume of Grade A office supply, which currently stands at its lowest level for ten years, remains the real pressure point in Edinburgh and other core markets outside of London. He said, “Edinburgh’s vacancy rate currently stands at 6.3%, falling from 7.1% twelve months ago. Combined with significant occupier demand and rental increases last year these ingredients are making for a very interesting cocktail for the year ahead.
“Despite an upturn in the amount of space under construction, current levels of supply are constrained and prime space will remain scarce in 2015. However, office development will become more viable, these schemes will take time to be delivered, and therefore a rise in pre-let agreements is anticipated in 2015.”
Colin Finlayson, Director of Capital Markets and Investment Management for JLL in Scotland, said: “2014 was a great year for the Scottish investment market, with £3.2bn of sales in 2014, up 82% on the previous year, making Edinburgh the biggest regional investment market in the UK outside of London. Global capital is looking for good investment homes and Edinburgh’s property market offers such a home. Edinburgh pricing is still a little softer than other regional UK cities, but for some that makes it a good proposition. Investment projects such as the trams are bold civic statements and the city’s growing technology sector appeals to investors, as does the resilience of the Capital’s financial and professional services industry.”