Aberdeen: Strengthening take-up in first nine months surpasses 2016 total
· Total transactions during the first nine months of 2017 reached 322,491 sq ft. This surpasses the total take-up level of 218,708 sq ft recorded in 2016.
· Take-up activity in Q3 was dominated by one large transaction, in which Chrysaor acquired 47,657 sq ft at The Capitol, 431 Union Street.
· Although crude oil prices remain low by long term comparisons, they have picked up in recent months and now stand at circa $58 a barrel, signalling a more optimistic picture ahead.
· Total available supply at the end of the third quarter stabilised at 2.8 million sq ft. The majority of available stock (80%) is secondhand.
· Prime headline rents in Aberdeen are once again unchanged at £32.00 per sq ft.
Derren McRae, managing director of CBRE Aberdeen, said: “With Q3 take-up registering 71,807 sq ft, take-up levels for the year to date have edged up to 312,500 sq ft – an encouraging figure given take-up levels for the same period in 2016 were around 150,000 sq ft.
“The stand out letting for Q3 in Aberdeen is Chrysaor’s 47,600 sq ft acquisition of five floors of The Capitol building on Union Street. The £3bn purchase of North Sea Assets from Shell has made the company one of the largest North Sea oil and gas producers virtually overnight. Its decision to locate to Knight Property Group and M&G’s 75,200 sq ft Grade A building not only has resulted in this recently completed speculative development becoming 95% let, but more interestingly it is the first time a major energy sector operator has relocated its staff from an out of town location back to the city centre – a break from the norm in Aberdeen.”
Edinburgh: Set for a record year of take-up
· The third quarter has seen another above average period of take-up, following on from a record single quarter in Q2. Take-up for Q3 totalled 213,124 sq ft, bringing the year-to-date total to 952,984 sq ft. As a result year end take-up will exceed one million sq ft for the first time since 2004.
· This year’s strong performance is, in part, due to the pre-letting of around 181,000 sq ft by HMRC at the end of Q2. However, the finance sector has also been active this year, as demonstrated by the newly merged Standard Life Aberdeen taking 69,000 sq ft at 10 George Street.
· Availability continues to decline, with a total of just 1.17 million sq ft available across all quality types, city-wide. Grade A space is even more limited.
· With continued low levels of supply, prime office rents have continued to push higher, standing at £32.50 per sq ft at the end of Q3.
Stewart Taylor, senior director in CBRE Edinburgh, said: “With the letting of 10 George Street to Standard Aberdeen in Q3 adding to the tale of major pre-lets in 2017 – a theme that is likely to dominate the headlines at the end of the year – Q3 take-up at 256,000 sq ft was down on the previous quarter but in line with the twelve month quarterly average of 244,000 sq ft.
“Take-up topped 1 million sq ft over the last twelve months for the first time since 2004 and at 25% ahead of the long term average, the office market has had a record year. This is reflected in a further significant fall of 27.5% in Grade A availability over the previous quarter and down 63% on the same quarter in 2016.
“The prospects for tenants seeking space over the next 36 months are not good with only two schemes under construction, GSS’ 2 Semple Street and Chris Stewart’s The Mint. The Hermes/City of Edinburgh Council Capital Square development is scheduled to start on site this quarter, adding much needed accommodation to the pipeline.”
Glasgow: Office supply continues to fall with limited Grade A choice
· The third quarter in Glasgow is often the quietest during any given year and this is true of 2017. With 63,608 sq ft of take-up, this is the lowest quarter of take-up since Q4 2011.
· As a result, take-up for the year to date is a little behind the pace set over recent years. For the year-to-date, total take-up in 2017 is 298,992 sq ft, compared to average of 403,000 sq ft over the same period during the past five years. However, there are many deals in legals at present, accounting for around 250,000 sq ft of space, so we expect a stronger final quarter.
· Supply levels continue to fall, with a total of 1.55 million sq ft available at the end of the third quarter. New build stock, of which just 266,500 sq ft is available, is at its lowest level since 2000.
· This position has therefore the potential to trigger further prime rental growth. However, for now prime rents remain stable £29.50 per sq ft.
Audrey Dobson, senior director in CBRE Glasgow, said: “Take up in Q3 was unusually low at just over 63,000 sq ft – a reduction of 51% on the previous quarter – with only two deals done over 5,000 sq ft.
“The poor take-up is a result of deals continuing to take longer to get over the line, however Q4 is on track to see the market rebound as there is over 240,000 sq ft currently in legals which are targeting a 2017 completion.”