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Commercial property: Lack of supply demands developments

There is no shortage of investors and developers looking to gain exposure to the Edinburgh office market.

However, as many landlords opt to hold on to their investments – attracted by rental growth and yield compression, there is a growing appetite to refurbish or redevelop older buildings in the Capital to meet the demand for quality office accommodation.

Edinburgh is experiencing historically high levels of occupier demand from a wide variety of sectors, with employers attracted by the city’s talent pool and the quality of life in the Capital.

However, the office market faces dwindling supply and we anticipate seeing a spike in rents as tenants compete for limited space.

Rents for grade-A offices in the city centre are currently around £35 per sq ft and could top £40 next year.

At present, there is little more than 250,000sq ft of prime office space available in Edinburgh and the two speculative developments currently in the pipeline – 
62 Morrison Street and 
20 West Register Street – are mostly or completely pre-let.

The Capital has lost more than 1.2m sq ft of office space to alternative uses in recent years, while take-up is running at 1m sq ft a year.

This poses two big questions: where will the money go? And where can thriving businesses house their growing numbers of staff?

Professional and legal services, the burgeoning tech sector, and a financial industry that continues to thrive – the market has rarely looked so good from an investor’s perspective.

Companies don’t want to relocate, even partially, because the city and lifestyle are key attractions for the talent that is the lifeblood of these service sector businesses.

But there are few – if any – sites in the city for large-scale speculative development still available.

Where possible, landlords are either substantially refurbishing older buildings or selling up, thereby avoiding construction and letting risks.

Competition for refurbished space is likely to hot up as the shortage becomes more acute; we are starting to see businesses actively competing for the best office locations.

Beyond that, the obvious escape valve for city centre-based companies lies to the west, around South Gyle and Edinburgh Park.

With excellent connectivity to the city and available space, we anticipate increasing demand and more interesting developments.

However, the city centre remains the most prized location for wealthy and ambitious, people-focused companies, and – where possible – older buildings will make way for more contemporary offices.

The re-development of Haymarket has been a start, but with investors poised and firms demanding more space, the next few years should see more interesting developments appearing.

Demand for office space around Edinburgh is likely to keep outstripping supply. As a result, rents look set to keep moving higher, especially as the city’s tech start-ups mature into larger companies, with a need to attract talented people.

By ELLIOT CASSELS

Source: Scotsman

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North’s commercial property market to end 2018 in strong position

THE north’s commercial property market is set to finish the year in a strong position, according to a new report.

The latest CBRE Marketview, covering the three months to the end of September, shows solid progress, building upon record levels of take-up in the first half of 2018.

The office market added a further 105,337 sq ft across 17 transactions in the third quarter of the year, bringing the yearly total to date to 643,983 sq ft.

The investment sector has also been busy, with total spend to date this year £122.2m, boosted by the completion of a number of high-profile office buildings, including the likes of Artola House, Moneda House and River House.

CBRE office agency director, David Wright believes refurbished office properties have given a “much-needed lifeline” to the market over the last three years, given the lack of new build activity.

“There are a large number of office deals agreed and currently in ‘legals’, and providing they complete in Q4, Belfast is set to experience one of the most active years ever recorded in this sector,” he said.

Despite the positives, political uncertainties remain a concern, according to CBRE managing director, Brian Lavery.

“Lack of local government and Brexit are impacting upon pricing, but it is clear that investor appetite in Northern Ireland remains encouraging from both locals and new institutional entrants.”

“We expect the final quarter of 2018 to be a particularly busy period, which should lead to investment volumes for the full year mirroring last year’s figures,” he added

The report acknowledges the impact of the August 28 Primark fire on the Belfast retail sector, but state that the market has held up reasonably well, with activity now increasing ahead of the key Christmas trading period.

Source: Irish News

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Boom time for commercial property sectors in Glasgow and Edinburgh

Glasgow has just witnessed a record quarter for office deals, with city centre occupier take-up exceeding one million sq ft for the year to date, according to data from JLL.

Thanks in large part to Barclays, which re-defines the ‘city centre’ parameters to cross the river Clyde, total take-up across Glasgow’s city centre reached 614,466 sq ft between July and September, spread across 31 deals.

Glasgow’s record quarter for office transactions brings the city centre’s total take-up for the year to date to 1,192,689 sq ft, with three months of the year still remaining. By marked contrast, office occupier take-up for 2017 totalled 627,313 sq ft.

In the largest deal of the quarter, and the year so far, Barclays took a 470,000 sq ft pre-let at Buchanan Wharf. Other notable deals in the city include 60,000 sq ft take-up at 123 St Vincent Street, and Glasgow School of Art and CXP Limited both signing new deals for more than 10,000 sq ft of city centre space.

In the first six months of 2018, take-up of city centre office space amounted to 578,223 sq ft, which was already boosted by notable major pre-let activity to the HMRC at Atlantic Square, and Clydesdale Bank’s 110,955 sq ft pre-let at 177 Bothwell Street. JLL have been involved in four of the top five largest deals in 2018 to date, and almost a third of all transactions this quarter.

According to JLL, Glasgow’s office market is continuing to attract activity and proving itself to be a desirable location for business to operate.

Alistair Reid, director at JLL, said: “With total take-up already exceeding 1 million sq ft, we anticipate that 2018 will be the best year for office take-up in Glasgow in recorded history.

“From larger corporates and government departments to SMEs and fintech firms, requirements and new enquiries for city centre space remain strong. It’s inevitable that this demand will continue to impact supply, but with three new speculative developments in the offing, there is at least a pipeline of new build supply further down the line.”

Along the M8, JLL is reporting that Edinburgh’s commercial property market is maintaining its strong performance for office occupier take-up, transacting over 300,000 sq ft of office space during the last three months.

According to JLL, a strong third quarter ensured that Edinburgh has already broken the annual 10-year average, following a record-breaking 2017 in which 1,100,000 sq ft was transacted.

Total take-up in Edinburgh reached 301,713 sq ft between July and October, an increase of approximately 30% year-on-year, spread across 49 deals.

The largest occupier deals saw Royal London secure 47,000 sq ft at 22 Haymarket Yards, while Brodies pre-let 43,000 sq ft and Pinsent Masons pre-let 27,000 sq ft at Capital Square.

Despite the prospect of another bumper year for the capital’s office market, grade A availability and the pipeline of new office space remain a major problem.

Craig Watson, director at JLL said: “The rapid pre-letting of new stock coming onto the market, such as the Capital Square development, underlines the limited availability of prime Grade A stock in the city centre. There simply isn’t enough in the short-term.”

Source: The National