Demand for commercial office space in Glasgow remained strong in the first quarter of 2017, further adding to the supply shortage in the city according to new research by JLL.
Take-up in Glasgow city centre was 101,163 sq ft, down by 64 per cent compared with the same quarter last year. Across Greater Glasgow and the West of Scotland 139,080 sq ft was transferred, a 60 per cent drop compared with Q1 2016.
Glasgow’s city centre experienced remarkable take-up activity in the first quarter of 2016, with 288,987 sq ft being transacted, a 103 per cent increase from Q1 2015 levels. The latest take up figures reflect a return to steady levels of occupier activity, which together with a lack of new offices being built, is causing vacancy levels to plunge.
In Q1 2017, office supply fell steeply below the 10 year average (9.07%) to 8.25 per cent. This shortage of supply in Glasgow is most noticeable in the Grade A office market, where only two new build office buildings are on the market with limited space available. There has also been significantly low development activity in the market, with no speculative stock currently under construction.
In total, there were 39 deals completed with 22 of those for properties in the City Centre. JLL advised on 25 per cent of City Centre transactions.
The top two deals of the quarter involved Mott Macdonald and Wood Group who acquired 5th and 6th Floor (34,515 sq ft) and the 2nd Floor (17,249 sq ft) at St Vincent Plaza, respectively.
Demand in Glasgow has remained strong, with 52 per cent of all enquiries received being City Centre requirements. City Centre is the most active location, with the 1,000 sq ft to 3,000 sq ft size bracket proving most popular, accounting for 41 per cent of total City Centre requirements. JLL received 80 new enquires from occupiers and other agents in Q1, 2017, showing a rise of 45% from the previous quarter.
The City Centre headline rent is £30 per sq ft and prime yields are sitting at 5.5 per cent.
Claire Watson, JLL Glasgow, said: “Occupier activity across Glasgow in the first three months of the year has performed steadily. With a healthy appetite for quality office space in Glasgow and a lack of new Grade A office stock coming to the market to meet this demand, the outlook is positive, creating pressure on the market. With Glasgow’s growing reputation as a city very much at the forefront of technology, media and the arts, demand to work in the city has never been greater. Such confidence at a time of relative political uncertainty both in Scotland and across the UK is testament to the city and the reputation it has amongst occupiers. With space increasingly tight across the city, occupiers looking to relocate or expand should consider their options as soon as possible, with many likely to opt for the pre-let route.”