A strong third quarter for take-up has helped the Edinburgh office market defy the economic gloom, according to new analysis from Knight Frank.
The independent commercial property consultancy found that 121,236 sq. ft. of office space was transacted in Edinburgh city centre between July and September, a strong bounce back from the previous quarter’s 50,834 sq. ft. and in line with the 121,403 sq. ft. registered during the same time last year.
Office take-up has historically tended to be lower during the summer months due to holidays, but there is a significant amount of pent-up demand for quality office space coming onto the market from the Covid-19 pandemic period, Knight Frank said.
While there was a mix of active sectors during the quarter, professional services and technology, media, and telecommunications (TMT) continued to drive demand, representing 43% and 12% of take-up respectively. The largest transaction of the quarter was Anderson Strathern securing 21,446 sq. ft. at Capital Square on a 15-year lease.
Large deals in the energy sector increased to 15% of total take-up in Edinburgh, with more space under offer and due to conclude in the final three months of 2022. Last quarter, energy equipment company Enoda secured around 8,500 sq. ft. at Quartermile 3, represented by Knight Frank.
A strong July to September meant Grade A supply continued to dwindle. However, Knight Frank noted that more ‘grey space’ – where tenants sub-let unused space – had begun coming onto the market.
Simon Capaldi, office agency partner at Knight Frank Edinburgh, said: “The demand for quality office space that built up during the pandemic has begun to filter through into deals, despite the well-publicised wider economic challenges we have faced this year. That could see Edinburgh move closer to the 10-year average for take-up this year, following the slump caused by Covid-19.
“We are, however, beginning to see more grey space becoming available in the market – space at 81 George Street and The Haymarket has recently gone on the market with the current occupiers re-sizing their office footprint. We expect more grey space to follow over the next few months, but with demand so high and space comparatively limited, it is unlikely to have a material impact.
“Occupiers are increasingly putting pressure on landlords to push forward with proposed refurbishment plans ahead of entry in 2023. We have also seen a rise in demand for ‘plug and play’ office options, where tenants can move in quickly without the hassle of large capital expenditure to fit-out the space.”