Research from leading commercial property consultancy CBRE Scotland shows the Glasgow office market has continued its strong start to 2018 into the second quarter with a further 330,963 sq ft of office space transactions, bringing the total take-up for the first half of the year 2018 to 593,901 sq ft – 11% above the ten year annual average of 535,000 sq ft.
The figure represents the highest six month total ever recorded for Glasgow on a data series that goes back as far as 1992, breaking the previous record of 532,634 sq ft in H1 2007. The market was bolstered by two significant pre-lets – HM Revenue & Customs took 187,205 sq ft at Atlantic Square in Q1 and CBRE secured 110,955 sq ft for Clydesdale Bank at 177 Bothwell Street in Q2.
Commenting on the figures, Audrey Dobson, senior director in the Advisory and Transaction Services team, said: “In spite of record high take-up for Glasgow, it’s important to remain measured when assessing the market’s performance. While the take-up figures are very impressive, they are skewed by two major pre-lets. Historically, we normally get a pre-let once every five years, so to have two announced during H1 is very unusual. We’ve also seen a lack of new entrants to the region and a lot of churn bringing property back to the market.
“There were a good number of deals below 5,000 sq ft and above 10,000 sq ft, but only three falling in between. The 5-10,000 sq ft requirements typically represent companies employing 50-100 staff, the Glasgow office market’s mainstay, therefore there is reason for concern if we don’t see lettings within this range pick up in the next quarter. Although Glasgow’s Central Business District performance was exceptionally strong, the Glasgow periphery and out of town office sector has experienced a poor quarter, with just 36,019 sq ft and 17,161 sq ft of take-up respectively.”
Andrew Marston, a director in CBRE UK’s research team added: “In both national and historic context, these are an impressive set of statistics for the Glasgow office market. We have every expectation that Glasgow will be the leading performer in terms of office take-up for any major UK city outside London during the first half of 2018.
“This year Glasgow has benefited from a major government office deal, joining the ranks of other UK regional cities who are benefiting from a new wave of consolidation through the creation of Government Hubs. Nevertheless, what our data for the city also shows, is that demand for office space in Glasgow also remains strong amongst wider private sector occupier base.”
Glasgow CBD office stock is sitting at 13.8 million sq ft, 1.41 million sq ft of which is available for occupation. Just 32,910 sq ft of this supply is Grade A.
Audrey Dobson continued: “Low stock levels can be explained due to competing uses as we see a rise in student residential, residential and hotel occupiers, as well as some demolition in the city centre. Grade A availability is now at worryingly low levels, and the city really needs to see some speculative development starting soon.
“Although the Atlantic Square development is now under construction, the Government Property Unit has already leased the first building in its entirety, and if it opts to acquire the second building, there will be no speculative office space remaining at the site. Bearing in mind the lengthy planning and construction processes, we are looking at several years for speculative developments to reach completion. Developers need to act now or Glasgow simply won’t be able to cope with future demand for Grade A office space and risks losing potential footloose occupiers to cities like Manchester.
“The Clydesdale Bank pre-let is rumoured to have set a new headline rent of over £30.00 per sq ft, up from £29.50 per sq ft at the end of 2017. This figure could grow further as availability continues to drop and building costs increase.”