Record offices take-up in Aberdeen as rents continue to rise – Knight Frank
Headline rental levels for prime office space in Aberdeen hit a record of £31.50 per sq ft last year and could reach £34 per sq ft by the end of 2012 as occupier demand remains strong and the shortage of Grade A space is still acute, says Knight Frank.
The firm’s latest research into the market for offices in Aberdeen notes that take-up was a record 773,175 sq ft in 2011, as occupier demand was boosted by high oil prices and renewed commitments to invest in North Sea oil. “While it could be argued that the city is overly exposed to a single sector, its long term prospects have been boosted by news that £10bn will be invested in the exploration of oil fields at Clair Ridge, to the west of Shetland, which will effectively guarantee oil production until at least 2030,” Knight Frank notes. Aberdeen was the only UK city to record net growth in business creation in 2011, according to a report by Centre for Cities, the firm adds.
“Aberdeen continues to command the highest prime headline office rent of any of the UK’s 11 key regional markets outside the South East,” Knight Frank says. Incentives are also less generous in Aberdeen than in other UK office markets, it adds.
The strong occupier market has increased demand for investment property in Aberdeen as well, but with only a limited supply of Grade A office space in Aberdeen available, transactions were restricted to £95m in 2011 – almost exactly the same as in 2010. Supply of prime space is currently just 9,433 sq ft and is confined to a single building, Dee Bridge House, Leggart Terrace, the firm notes.
As elsewhere, the scarcity of development finance has restricted speculative development in Aberdeen. The only city-centre development currently under way is Knight Property Group’s 6,262 sq ft extension to Queens House. Knight Frank says the lack of choice in the centre of the city has led some occupiers to seek office space in out-of-town markets.
