Edinburgh’s office market saw a record number of regears during 2022, as occupiers decided to stay put amid economic uncertainty, according to analysis from Knight Frank.
The independent commercial property consultancy found that 493,315 sq. ft.1 of office space was involved in regears last year, a dramatic increase on the 158,900 sq. ft.1 recorded in 2021. More than one-quarter (28%) of these deals involved professional services firms, while another 23% was re-let to public sector organisations.
548,727 sq. ft.2 of new city centre office space was also taken up last year, slightly down on the 577,532 sq. ft.2 let during 2021. The 2022 figure was boosted by Blackrock securing 139,172 sq. ft. at 20 Brandon Street, in the biggest deal of the fourth quarter.
Supply of new and refurbished space is expected to remain constricted, with all of the 110,000 sq. ft. that was scheduled to be delivered in 2022 pre-let and 76% of the 370,000 sq. ft. for 2023 already secured by occupiers.
Knight Frank predicted that the continuing supply-demand imbalance, and a vacancy rate of less than 1% for new-build Grade A space, could push Edinburgh’s headline rent north of £42.50 per sq. ft. early in 2023.
Toby Withall, office agency partner at Knight Frank Edinburgh, said: “Many occupiers have decided to stay where they are in the current uncertain economic climate, but take-up in Edinburgh has remained resilient. It is noteworthy that the predictions made during the pandemic of occupiers abandoning their office space altogether has failed to materialise – they still see offices as an integral part of their business plans.
“The flight to quality has continued and looks like becoming a permanent feature of the market. Many occupiers are now insisting on strong ESG credentials for their property and are placing high importance on wellbeing facilities and access to prime amenities. ‘Plug and play’ office options also continue to be attractive to occupiers, allowing them to move in quickly without the hassle of large capital expenditure to fit-out the space.
“However, the development pipeline remains very limited for the next year or so and any additional activity will likely be influenced by cost inflation. While there are new-build projects set to be delivered, they have all been pre-let leaving only refurbished space available until well into 2024.
“Availability will be a challenge for the year ahead, with a particular lack of good quality, small to medium-sized Grade A suites. In turn, this could push rents higher for the best available space. Occupiers, therefore, need to plan ahead and act quickly if they want to secure the quality of space they are looking for, with some having to consider out-of-town accommodation.”