Prime office space in Edinburgh to push rents higher – Savills
Prime headline rents for office space in Edinburgh city centre are set to come under pressure to rise towards the end of 2012, according to the latest research from Savills.
A growing shortage of supply is forecast to push current rental levels up from a current £27.50 per square foot towards the previous peak of £30.00 per sq ft as the number of high-profile office requirements in central Edinburgh has not weakened.
Keith Dobson, Head of Savills Edinburgh office team, says there is also an increasingly widespread perception among Edinburgh occupiers that a shortage of suitable office space is imminent – he expects this to stimulate those with lease expiries between 2014 and 2016 to try to secure new premises as soon as possible.
“This continued demand combined with constricting supply will lead to a reduction in incentives and an inevitable upward pressure on rents,” he adds. Savills expects banking and financial services occupiers to return strongly this year after a notable absence in 2011, and also forecasts an increase in demand from telecoms, media and technology occupiers, who dominated take-up in the final quarter of 2011, accounting for 38% of the total.
Overall availability in Edinburgh at the end of 2011 was 2.6m sq ft, Savills says, which is down from a peak of 3.3m sq ft in 2009. The firm expects many medium-term requirements to be satisfied by pre-lets.
Mat Oakley, head of Savills commercial research, says an increasing amount of conversions from office space to hotel or quasi-residential use will exacerbate the supply shortage in Edinburgh. “As a result of this our central forecast for Edinburgh is a steady fall in total availability with a sharper fall in Grade A availability over the next five years”.
