A lack of available office space in Edinburgh poses a threat to continued growth in Scotland’s economy, attendees at JLL’s latest property seminar heard.
JLL predicted record office occupier take up in Edinburgh for 2015 and a fall in vacancy rates, placing more strain on supply across Scotland’s capital.
In Edinburgh, office occupier take up for the year to date now sits at 605,000 sq ft and is set to significantly exceed the five year average of 650,000 sq ft. Vacancy rates in the capital have decreased from an 8% high in 2009 to 5.1%.
In Glasgow, headline office rentals have increased to over £30 per sq ft in 2015. Notably, three major office developments in Glasgow completed in 2015 – the first new build completions in over five years. The buildings, 1 West Regent Street, 110 St Vincent Street and St Vincent Plaza have already experienced strong letting activity.
As well as providing local market predictions for Edinburgh and Glasgow, Jon Neale, Head of UK Research at JLL, provided an overview on Scotland’s broader economic and property market trends. Neale predicted a strong outlook for Scotland’s economy, with GVA growth of 2% for 2016 compared to 1.7% in 2015, driven by a number of factors including continued low interest rates and strong retail sales.
Cameron Stott, director at JLL said, “We’ve witnessed sustained levels of occupier demand throughout 2015, and with another anticipated drop in the availability of Grade A office supply in Edinburgh, demand looks set to outstrip supply. The development pipeline is becoming increasingly restricted, with new developments being pre-let well in advance of occupation. Coupled with increasing trends to convert cat B properties into hotels and residential developments, we’ve seen a significant drop in the levels of quality office space available in Edinburgh. JLL research suggests there is strong occupier demand for accommodation in the next two to four years which will be in line with the next wave of development, not expected to reach practical completion until late 2017.”