Edinburgh’s office market has seen a strong start to the year led by the Technology, media, and telecommunications (TMT) sector, despite well-publicised macro-economic challenges, according to new analysis from Knight Frank.
The independent commercial property consultancy found that the first quarter of 2023 saw another 90,872 sq. ft. of office take-up, excluding regears. While slightly lower than last year’s 100,856 sq. ft., this pushed the city’s vacancy rate down to 8.06% for all grades and below 1% for Grade A space.
TMT organisations accounted for the largest share of take-up at 34%. Ofcom, the UK telecommunications regulator, secured 9,650 sq. ft. at Quartermile in the largest deal of the first three months of the year.
Energy companies represented another 20% of total take-up during the first quarter, with Falck Renewables and Orsted taking 7,147 sq. ft. each at 2 Lochrin Square. Knight Frank was involved in four of the quarter’s top five deals, representing 47% of total take-up.
With space currently under offer at £42.50 per sq. ft. and 76% of the 370,000 sq. ft. of space scheduled for 2023 delivery already pre-let, Knight Frank predicted there will be further rental growth before the end of the year.
Simon Capaldi, office agency partner at Knight Frank Edinburgh, said: “The imbalance between the supply and demand of office space in Edinburgh is reaching chronic levels. While there is new space in the development pipeline, the vast majority of it has been pre-let and only refurbished product is available until later in 2024.
“In fact, much of the best quality space that is available is second hand and there is a real lack of Grade A building stock which can supply floor plates of less than 10,000 sq. ft., where much of the demand is coming from. This is putting pressure on quality stock in the city centre, which may push more occupiers to out-of-town locations.
“The flight to quality amongst occupiers that came about during the pandemic has intensified, with many now insisting on ESG credentials, wellbeing facilities, and prime amenities as part of their property needs. Occupiers are also increasingly looking for landlords to push forward with proposed refurbishment plans ahead of entry this year, with ‘plug and play’ office options also remaining in-demand.”