Avison Young: H1 2022 Scottish Office Market overview
H1 2022 Scottish Office Market overview: demand for greener, sustainable property continues to outstrip supply
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Like for most markets across the UK, 2022 has been a mixed year for the Scottish commercial property market so far. With significant uncertainty and unexpected economic events affecting the UK economy, the knock-on effects on the Scottish property markets were inevitable.
Scotland’s office market traditionally follows the office markets in London and the larger English cities, which have been experiencing low supply levels of prime space with a limited pipeline of new build offices.
With the return to the office, there has been a focus on quality from those occupiers able to commit to the prime new build projects. In both Glasgow and Edinburgh, the demand for new build Grade-A net zero, sustainable office space is outstripping demand with nearly all existing developments occupied, with space under offer or in advanced discussions with occupiers.
Avison Young associate director, Michael Facenna explained: “In Glasgow there is currently just over 100,000 sq ft of new build Grade-A space available – at Cadworks on West Campbell Street, and at 2 Atlantic Square and we are seeing strong interest in the remaining space within these buildings. We expect the remaining new build space to let up this year and therefore occupiers seeking to relocate in the next 12-24 months will need to consider refurbished Grade-A buildings, several of which are coming to the market, such as 50 Bothwell Street, 200 Broomielaw, and 6 Atlantic Quay.
“Recent deals include OVO Energy taking 33,905 sq ft at Cadworks, and WIZU Workspace taking 24,350 sq ft at 2 West Regent Street for their first co-working venture in the city.”
Ninety-seven per cent of space recently completed or under construction in the city centre is already let or pre-committed as occupiers look to secure first-mover advantage.
Michael added: “2022 is the year we have emerged from the pandemic, but we have yet to see a full return to bustling city centres. Understandable caution because of the wider economic conditions and more flexible working arrangements have meant occupiers are not yet back to pre-pandemic levels of staffing within city centre offices. However, with the summer holiday period over we do expect to see an uptick in activity as occupiers continue the flight to quality space to attract staff back to the workplace”.
In Edinburgh, the current development cycle, planning, and site constraints indicate it is unlikely there will be any new build offices completing in the city centre until at least late 2025.
Peter Fraser, Director, Avison Young in Edinburgh, said: “Since the easing of lockdown restrictions we have seen a real focus on prime and new accommodation which can satisfy the increasing importance occupiers are putting on their ESG and sustainability requirements. Consequently, almost all new and prime stock is now let or under offer.
“Therefore, when these occupiers move, existing landlords are refurbishing and repositioning existing office stock to bring the space in to line with occupier requirements. This will help landlords retain existing tenants and attract new ones.”
There are already a handful of full building refurbishments underway or awaiting planning including New Clarendon House (35,000 sq ft), 30 Semple Street (50,000 sq ft) and 60 Morrison Street (85,000 sq ft) which will help meet demand for new prime space moving forward.
Peter added: “Similar to Glasgow, with the return to school following the summer holidays, the anticipation is that we will also see a greater number of staff return to the office, and on a more frequent basis.
“The past few weeks have really seen a buzz around Edinburgh again with the Fringe and an increase in tourists to the city. For me, with summer ending, it will be interesting to see how many of those visitors will be replaced by local office workers as we are continuing to hear of more and more businesses encouraging their staff back to the office.”
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