Office occupier take-up in Edinburgh is on course to exceed 1 million sq ft in 2017 after a steady third quarter of activity, according to the latest research by JLL Scotland.
In total, c.200,000 sq ft of office space, spanning 35 deals, was transacted in Edinburgh during Q3, up by nearly 50 per cent on the same quarter last year.
JLL predicts that the year-end will be well over 1,000,000 sq ft of take-up, ahead of last year’s 780,000 sq ft transacted and surpassing the 1 million mark for only the second time in the capital’s history.
The total take-up for the year to date (Jan – Sept) reached c.974,000 sq ft, already slightly ahead of the long term average for a full year.
The largest deal of Q3 was Aberdeen Standard Investments taking 69,000 sq ft at 10 George Street further increasing its presence at the east end of the city, around St Andrew Square. This takes the tally of deals to 6 transactions over 30,000 sq.ft. so far this year.
The number of requirements in 2017 so far has increased by 12% from the same period last year. The average deal size was 5,500 sq ft. JLL was involved in 40 per cent of transacted space in Q3 2017.
The city wide vacancy rate at the end of Q2 was 4.4%. This has dropped to c.4% with the city centre Grade A vacancy rate calculated at only c.0.9%.
A significant “skewing” factor in the half year spike is the UK Government’s decision to locate a new c.190,000 sq ft UK Government Hub at New Waverley in Edinburgh City Centre. The biggest single office leasing deal in Edinburgh for over twenty years, the move will involve the relocation of around 2,900 full time civil servants into the Grade A city centre premises in 2020. The UK Government Property Unit, advised by property consultants JLL, is overseeing the deal for the new Hub.
Edinburgh continues to attract businesses with global reach, particularly within the TMT sector, with the latest example being Skyscanner’s parent company CTrip. It announced plans in September to open a customer service call centre in Edinburgh, creating up to 200 new jobs in the city (acquiring space in One Lochrin Square).
Craig Watson, Director at JLL said “The first nine months of 2017 have been particularly active with a number of large deals helping to boost the capital’s take up figures. As has been the case for some time in Edinburgh, a declining vacancy rate and a lack of new office developments has fuelled demand and restricted choice for occupiers in our market. Vacancy rates have dropped again in this quarter, but we do predict that new speculative office developments will begin in the coming months and into early next year which should begin to provide relief when complete.
“Due to a lack of choice for occupiers, prime headline rents are set to rise across the development pipeline. It’s also likely that this will further compound the two tiered market we are experiencing between new grade A and refurbished stock. Of the available space in the city centre, over 60% is older stock of more than 5 years old, some of which has never been occupied, and therefore we know there are still generous offers on space which has over-hung the market. We remain cautiously optimistic for 2018.”
