A severe lack of Grade A office space could have a significant impact on Edinburgh’s attractiveness as a location for businesses, according to Knight Frank.
The commercial property consultancy’s projections show that, following deals which are expected to complete by the end of Q1 2019, there could be as little as 175,000 sq. ft. of available Grade A space in Edinburgh city centre. While there are several projects in planning or due to be completed in the next 24 months, a large share of this space has already been pre-let.
Edinburgh’s city centre average annual take-up of Grade A space has hovered around 230,000 sq. ft., however, last year was significantly higher at 338,482 sq. ft. Knight Frank said that if 2018’s level of demand was to continue, it would become imperative to find a way of addressing the lack of available stock.
Overall take-up in Edinburgh was 986,003 sq. ft. in 2018, with more than half of that figure (574,162 sq. ft.) in its core area. This comfortably outperformed the 10-year city-wide average of just over 650,000 sq. ft.
Professional services accounted for the largest sectoral share of activity in 2018, with 34% of take-up. This was led by law firms Brodies and Pinsent Masons agreeing pre-lets for 43,174 sq. ft. and 25,265 sq. ft. at Capital Square, respectively. The finance, banking and insurance sector accounted for 30% of take-up, while technology, media and telecoms (TMT) stood at 19%.
Toby Withall, Office Agency Partner at Knight Frank, said: “Many will focus on another year of strong take-up in Edinburgh, but the development pipeline was the dog that didn’t bark in 2018. We’re quickly approaching the point, if current trends continue, where there could be very little available Grade A office space for occupiers to consider in the city centre.
“This could significantly impact on Edinburgh’s attractiveness as a location for businesses. Indeed, any companies planning to move within the city over the next year will need to carefully consider their options or look at pre-letting some of the new space which will be delivered in 2019. We expect to see an increase in rental figures and a tightening of incentives offered to tenants over the next 12 months.
“There are a considerable number of requirements in the market, which will eat into an already diminished supply of Grade A space in the first quarter of 2019. However, the lack of new development, restricted in part by the historic nature of our city, has become the major obstacle to continued growth in the office market.”