Financial services feature in Edinburgh offices market – Savills
Savills estimates that by the end of 2012, only 15% of the vacant office space in Edinburgh was Grade A. Overall office availability in the city has fallen by nearly 10% during the past year, the firm estimates, with virtually no new or refurbished space of any size available in the central business district but significant levels of Grade B and Grade C space across the city, particularly in West Edinburgh.
Take-up of Edinburgh office space during H2 2012 was not as strong as during the first half, at around 300,000 sq ft. This took the total for last year to 711,769 sq ft, just 3% below the 10-year average. Savills says this means leasing activity last year was a healthy 21% above the 2011 total, driven by inward investors as well as moves by existing Edinburgh occupiers.
Savills points out that the insurance and financial services sector was the most active acquirer of space in Edinburgh last year, including Blackrock’s 80,000 sq ft letting during H1 2012. “This strength is relatively unique in a national context, with most regional cities having seen a fall in financial services leasing activity in recent years,” the firm notes. Meanwhile the TMT sector is becoming increasingly important in Edinburgh, as seen elsewhere in the UK, accounting for an estimated 15% of all leasing activity in 2012.
The tone of average prime rents for office space in Edinburgh rose from around £25 per sq ft to around £27-£28 per sq ft during the second half of last year, Savills says: the gap between core and fringe rents has continued to widen, and the gap between prime core and out-of-town rents is now its widest for more than 20 years. “A similar story is true in terms of the gap between Grade A and Grade B rents, with Grade A rents remaining stable, and Grade B rents continuing to fall in the second half of 2012,” the firm adds. Rising forecast employment and a bulge in lease events will make the handful of immediately deliverable schemes in Edinburgh look increasingly attractive, and schemes such as St Andrew’s Square and The Haymarket are expected to set new rental highs when they come to market.
