Edinburgh landlords can’t rely on location to secure office occupiers

Stewart Taylor, a senior director at CBRE in Edinburgh

A recent survey conducted by Global real estate agency CBRE highlighted attracting and retaining labour as one of the top three strategic challenges faced by occupiers – with the proportion citing it as an issue doubling in the 12 months prior.

The Optimising Human Capital report identified four levers which companies are using to influence and enhance their appeal to skilled labour: procurement and fit-out strategy; flexible space strategy; user experience strategy; and technology strategy.

Stewart Taylor, a senior director at CBRE in Edinburgh, commented: “An office is no longer simply space to work from; it is a weapon in the labour war. With the amenities and technological readiness of buildings of increasing importance in attracting employees and meeting social and corporate governance (SCG) requirements, Edinburgh’s landlords can no longer rely on the old standards to compete.

“The demands on developers of new buildings are greater than ever before – you can deliver a new office but if you haven’t taken cognisance of the changing landscape, you will lose out to those who have. BAM’s Capital Square, a 120,000 sq ft city centre office development, is being built with the four levers identified in our Optimising Human Capital report in mind, recognising that while the location, location location mantra remains valid, it has new bedfellows.

“However, due to complete in May 2020, Capital Square is already 55% pre-let. The only other speculative office scheme under construction in Edinburgh is Vastint’s 60,000 sq ft New Fountainbridge. For a city with an average annual Grade A take-up of around 260,000 sq ft, it is highly likely that these office schemes will be pre-let some time in advance of their completion.

“This raises the question as to what those existing or new occupiers to Edinburgh do when they can’t find suitable space. The issue is arguably further exacerbated by the fact that take-up in Edinburgh includes a high proportion of occupiers from the creative sector where the employment war is even more vicious. If the city can’t deliver the armaments, occupiers are fighting at a disadvantage and will choose a different battlefield.

“A small number of older buildings can be adapted to meet some of these new demands but it is easier to build new than retro-fit, particularly when it comes to user experience and technology. It is vital that Edinburgh sees more developers follow in the footsteps of BAM and Vastint to deliver accommodation that meets the expectations and requirements of today’s occupiers, otherwise we risk losing potential footloose occupiers to other major cities.”

The upside for landlords is that two thirds of occupiers surveyed said that they would be willing to pay premiums for space which offers superior user experience. This includes highly-serviced, amenity-rich space and tech-enabled smart space, which sees different technology systems work together to make the building highly efficient, flexible and a more attractive and desirable place to work.

Stewart Taylor continued: “This new world sees strategies for skills, space and service converging. Occupational decisions are no longer the sole domain of the property teams. Not all developers are embracing this new world and with the speed of change only increasing, those that simply repeat what they’ve done before will find they’re talking a different language to the occupiers. It’s imperative for Edinburgh that its new developments are fluent in occupier if the city wants to remain a solid contender in the UK labour war.”