Commercial office activity in Glasgow slowed in the three months from July to September due to a lack of new developments, according to new research by JLL. But with significant public sector office deals expected to land in the final quarter of the year Glasgow’s office market could be set for a stellar 12 months well above five-year averages.
Occupier take-up for Q3 2017 in Glasgow’s city centre totalled 63,608 sq ft, a 38 per cent drop compared with the previous quarter. Across Greater Glasgow 111,476 sq ft of floor space was transacted.
The total figure for city centre take up now stands at 297,272 sq ft, but with a number of large deals set to land in Q4, JLL expects 2017 to finish with totals at c. 750,000 sq ft well over the five-year average.
Unlike previous quarters, the third quarter provided no large deals to boost the figures. A handful of major occupiers such a Morgan Stanley, KPMG and TLT Solicitors opted to remain or regear at their current premises, accounting for 43,904 sq ft of unrecorded deals. There were no New Build Grade A deals completed, however there were reasonable levels of take up within the Grade B sector.
The two biggest deals of the quarter were Incremental Group who took 8,353 sq ft at The Garment Factory in Merchant City and McClure Solicitors who acquired nearly 8,000 sq ft at Pacific House close to Central Station.
Recent office demand in Glasgow has been focused on the city core, with 92% of all enquiries received being City Centre requirements. The City Centre is the most active location, within the 3,000 sq. ft. to 5,000 sq. ft. size bracket proving most popular requirement.
Alistair Reid, Director at JLL in Glasgow, said: “The sluggish performance of the latest quarter has really shone a light on the lack of new developments within the city centre. However, with a significant amount of public sector requirements set to land before we enter 2018, this quarter is the relative calm before a storm of activity helps to push the annual total well over five-year averages.
“With no new build speculative stock under construction at the moment, we expect more of the same moving forward, and many firms to stay put until high quality stock comes on to the market. Supply has remained consistent at 8.55%, below the 10-year average, with new refurbished stock coming to the market in lieu of new builds. This growing trend has increased activity in the high quality, refurbished Grade B office market. The shortage in supply has increased pressure on rental packages, providing a more favourable market for landlords.”
Despite also feeling the effects of a lack of new office stock, Glasgow’s office investment market did close four key deals between July and September totalling £56.96m, bringing the total investment volume to £121m for 2017.
Wirefox’s off market acquisition of Capella, York Street for £43.5m (6.50%) was the most notable deal. JLL acted on behalf of the vendor, Invesco, in what represented the largest single transaction to occur in the Glasgow Investment Market since 2015.
Ross Burns, Director – National Investment at JLL, said: “We expect there to be an increase of investment activity in Glasgow City Centre, in the final quarter of 2017. Approximately £118m of office investment stock is currently under offer and it is anticipated that more stock is imminently coming to the market.”
