Office occupier take up in Edinburgh continued to show strong overall demand during the first quarter of 2016 but over half of this related to two large deals, according to new research by JLL.
In excess of 283,000 sq ft was transacted between January and March, a 34% increase in occupier activity compared to the same period last year, but down slightly on 2015’s final quarter figure of 330,000 sq ft.
Forty-five occupier deals were transacted over the period. Strong demand was particularly noted at the upper and lower size brackets within the market, however there were only three mid-market transactions being between 5-20,000 sq ft.
63% of Q1 uptake was generated by two transactions – Edinburgh Napier University purchasing Forthstone, Broadstone and Cornerstone at South Gyle Business Park (107,514 sq ft), and the pre-let to Cirrus Logic at Quartermile 4 (70,041 sq ft). JLL were involved in both deals, advising Edinburgh Napier University and Cirrus Logic.
JLL – involved in 80 per cent of transacted space by sq ft over Q1 – predicts further pre-letting activity to occur over the next two quarters with increasing pressure on occupiers looking to secure modern open plan offices of 30,000 sq ft and above across the city until more speculative developments or refurbished stock enters the market.
The next wave of available new office developments won’t achieve practical completion until late 2017 at the earliest.
Ben Reed, Regional Director Office Agency at JLL in Edinburgh, commented: “Confidence levels within Edinburgh’s office market remain high, especially sub 5,000 sq.ft, which includes traditional townhouses, or for larger offices over 30,000 sq.ft offering more efficient and flexible floor plates, attractive to the bigger corporates. The mid-market is currently proving less resilient ensuring greater choice for occupiers across the city.
“The tight supply of new Grade A space continues to challenge larger occupiers seeking space over the next 18 months as they will be faced with limited options until new speculative developments reach the market.
“Lack of readily available options, coupled with the impending Scottish election and European referendum, could lead to a slowdown in the volume of office transactions over the next quarter with key decisions being held off until the outcome is known.”