finance

How office markets fared in lockdown: Aberdeen, Edinburgh and Glasgow



Take-up of new office lets in Edinburgh was down 57% year on year during lockdown, according to real estate advisor CBRE.

But the firm said office tenants in Scotland are going ahead with new leases and moves despite the economic uncertainty wrought by coronavirus.

The firm’s latest figures reveal office take-up in Edinburgh for the second quarter was down 84% on the same period last year as the country remained in lockdown.

But it said there are signs in Scotland’s largest three cities that despite the onset of mass home working, reports of the office’s demise have been exaggerated.

Stewart Taylor, head of CBRE’s Scottish office agency business, said: “The offices sector, along with every other sector, has not emerged unscathed from the Covid-19 pandemic. The figures are unsurprising, particularly as buildings couldn’t be viewed or surveyed.

“If anything, activity was actually better than expected. What has been encouraging is that despite an industry-wide debate on how we will work in the future, occupiers have continued to progress acquisitions and the last three weeks have seen a marked increase in the speed at which negotiations and deals are progressing.

“While offices in the future may look different and may be smaller than anticipated at the start of 2020, the desire to have an office base remains and in fact much of what we’re seeing is simply an acceleration of trends that were already occurring – a flight to the best quality space with the best wellness credentials.

“With the delay in the completion of new buildings, the critical shortage of new space in Edinburgh and Glasgow has simply been exacerbated.  This, coupled with positive employment forecasts for the regions, means we don’t foresee any impact on headline rental levels.”

Edinburgh

  • Q2 take-up for the first half of 2020 was 57% down on the first six months of 2019 and 68% down against the five-year average of 488,218 sq ft.
  • There was a record low number of deals – just 11 between April and June.
  • There were nine lease regears comprising just over 53,000 sq ft. The largest was at Leven House, Edinburgh Park where Computacentre took just under 6,000 sq ft of space. Celestia Technologies took space at Quantum Court and Discovery Drive in at Heriot Watt Research Park.
  • 1,609,237 sq ft of space is available, a 21% increase year-on-year, but city centre supply remains low at 749,770 sq ft and only 271,221 sq ft of new Grade A city centre stock.
  • Delayed completion dates on new office developments such as Capital Square and New Fountainbridge, squeezed city centre Grade A supply.

Angus Lutton from CBRE in Edinburgh said: “As we begin the third quarter we are already seeing an increase in activity as Government lockdown measures are eased. There are still new requirements coming to the market and existing requirements in the pipeline which is encouraging for the next quarter.”

Glasgow

  • Take-up for the first half of the year is 17% down year on year and a further 35% down against the five-year average of 397,125 sq ft.
  • Key deals included the University of Glasgow taking 30,000 sq ft at Berkeley Square and Orega leasing 14,000 sq ft at 220 St Vincent Street.
  • Total supply is at 1,642,346 sq ft, a 1% rise year-on-year.  Available new Grade A office stock stands at 11,509 sq ft.
  • The pandemic delayed completion of Atlantic Square and 177 Bothwell Street, further squeezing city centre Grade A supply.

Alistair Urquhart, director at CBRE in Glasgow said: ” We have seen several occupiers take short term lease extensions in order to make more informed decisions over the coming six to 12 months.

“The level of new supply has naturally been affected with delays to construction resulting in postponed completion dates. 55 Douglas Street will be the only refurbishment project in the city to complete in 2020.” 

Aberdeen

  • Q2 take-up in Aberdeen totalled 32,847 sq ft, a drop of 69% year on year.
  • Total take-up for the first half was 211,293 sq ft, which is 42% up on the first six months of 2019 and a further 5.5% up against the five-year average of 192,630 sq ft.

  • Q2 saw a record low number of deals with just eight.
  • Deals included a 16,212 sq ft letting for Expro at Kirkhill House in Aberdeen Business Park, Dyce plus 6,079 sq ft at The Silver Fin Building.

  • Availability is 2,497,981 sq ft, down 11.6% from the first half of 2019.

Derren McRae, managing Director of CBRE’s Aberdeen office, said: “As we are seeing across various markets, take-up levels for Q2 in Aberdeen have been impacted by Covid-19 and the resultant effect on oil price. However, whilst there has only been 32,847 sq ft of office lettings in the quarter, two out of town office buildings totalling 124,663 sq ft were sold to investors/developers.

“Despite what people may expect to be challenging market conditions in the North East, we are encouraged by the level of current market activity with five live requirements equating to approximately 370,000 sq ft of potential future take-up.”

Investment

Steven Newlands, executive director in CBRE’s Investment team, added: “Controls put in place by the government meant that activity was almost non-existent other than with transactions that were well progressed prior to the start of lockdown.

“We expect transaction volumes to increase in the third quarter as we exit lockdown and then accelerate further in the fourth quarter of the year.

“A number of international investors appear encouraged by the progress elsewhere in the world where there are signs of a return to ‘normal’ life. It is likely that outbound capital from the Far East will be active in the UK real estate investment market as and when the UK stabilises as we predict the currency differential will remain attractive.”



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