Nearly a third (30%) of all office space transacted across Edinburgh in 2016 involved businesses working in technology, media or telecoms (TMT), compared with a UK average of 16 per cent, according to a new report from JLL.
For a second year running, TMT occupiers were the most active business segment during 2016, accounting for 30 per cent of all floorspace taken-up in the capital. Edinburgh’s professional services sector followed in second place with 21 per cent.
Notable deals involving TMT occupiers in 2016 include chip designer Cirrus Logic, which took more than 110,000 square feet of space at Quartermile Four. The development, on the former site of the capital’s Royal Infirmary is also home to Scotland’s two tech unicorns – Skyscanner and Fanduel.
JLL’s Big 6 report, which was launched in Edinburgh on Thursday 23 March, looks at the performance of the six main commercial property markets outside of London.
In line with Edinburgh’s rise as technology hub, the report also found that Edinburgh has the best superfast broadband coverage in the UK, topping the charts with 96.2 per cent. Glasgow is not far behind with 95.5 per cent, well above the UK average of 84 per cent and London City’s 56.6 per cent.
According to the report, overall office vacancy in the Capital’s market stands at 4.8%, unchanged from 12 months ago, and still at its lowest level since 2009. This is primarily due to the release of Grade B space over the course of 2016. The pressure on good quality immediately available space continues to tighten with the Grade A vacancy rate standing at 1.7%.
Three new build office developments across Edinburgh are currently under construction, with only one set to complete in 2017 a large proportion of which is under offer. With the other two buildings not set to complete until well into 2018, the supply gap is likely to intensify further, and occupiers looking to secure good quality space may need to consider the pre-let route.
With the new build pipeline slow to react, several office refurbishments have commenced including Greenside, delivering over 36,000 sq ft and Edinburgh’s largest single office space measuring 62,416 sq ft, One Lochrin Square which will be launched shortly following an extensive refurbishment.
JLL’s Big 6 report found the capital’s investment market experienced a resilient 2016 with £391m transacted, up marginally on the 2015 volume. The most significant transaction during Q4 was the purchase of Dundas House by AAM for £24m, reflecting a yield of 5.65%.
Over the course of the year the sale of Atria One & Two to Deka Immobilen for £105m dominated activity.
Edinburgh broke into the world’s top five cities within JLL’s global property investment index thanks to its increasing appeal among the international investment community. Edinburgh is ranked fourth among the world’s top tier cities behind only Oslo, London and Munich for overall Investment Intensity, which compares the volume of direct real estate investment over a three-year period relative to the city’s current economic size.
Cameron Stott, Director at JLL in Scotland, explains why tech firms are choosing Edinburgh:
“The tech sector in Edinburgh has boomed over the past decade, providing more diversity to an office market previously reliant upon traditional markets such as banking and professional services. With the University of Edinburgh’s School of Informatics consistently producing talented workforce and a flow of successful spin-out companies, it’s clear to see why more companies are choosing to stay in Edinburgh or establish a presence here for the deep pool of talent.
“With sustained take-up activity across the UK’s Big 6 office market last year, and changing demand from occupiers, the commercial property market has adapted to address requirements now expected by most occupiers, a change which has been led primarily by the growing tech sector in Edinburgh. Increasingly, we are targeting the TMT sector, by offering ‘defurbished office space’ featuring exposed systems with an industrial feel but also by providing cycle bays, quality showers and changing rooms. With over two thirds of tech jobs predicted to be based outside of London in 2017, we expect that Edinburgh will be a key beneficiary, attracting growing levels of investment and continued growth in the volume of technology occupiers.”