Despite an investment wobble in the run up to the independence vote, Edinburgh office take up reached a decade-long high last year.
Around 875,000 sq ft of office space was transacted through lettings and sales in the Scottish capital during 2014, according to property services provider Jones Lang LaSalle (JLL).
The end-of-year total is the highest since 2004 — up about 13 per cent from the 2013 figure of 773,000 sq ft — and is significantly above the five-year average of 650,000 sq ft.
Describing the rise as “stella”, JLL highlights two major contributing factors: a spike in the post-referendum final quarter and the pre-letting of 108,000 sq ft at 6 St Andrew Square to Standard Life Investments, a single deal that was the largest of its kind in more than ten years.
JLL, which claimed its was involved in some capacity in 48 per cent of all Edinburgh transactions last year, warned however that the “lack of immediately available new Grade A office space has become more acute, leading to further pre-letting activity”.
The city’s development market reacted to this shortfall by commencing three new offices schemes in 2014. But while others expected to begin on-site work this year, no new office developments are slated for completion during 2015.
Because of this shortage JLL expected a two-year “ripple of occupier movement” to the western edge of Edinburgh until new schemes become available during 2016 and due mainly to the high city centre rents.
While the financial services sector underpinned much of the activity, the city also benefited from the growing strength of the technology, media and telecoms fields, all three of which are this year expected to continue to expand.
Key information technology transactions during 2014 included the letting of 75,514 sq ft to Rockstar at Barclay House, the former home of The Scotsman newspaper; 26,600 sq ft to the Codebase technology incubator at Argyle House; 25,555 sq ft leased to The Scotsman for its new head office at Orchard Brae House on Queensferry Road, and Zonal Data Retail Systems moving into 20,600 sq ft at Tanfield.
JLL also noted that the office sector is likely to be skewed in favour of landlords, especially within the confines of Edinburgh city centre. “As a result of current market dynamics, we will see rental growth whilst tenant incentives continue to decrease,” explained JLL regional director, Ben Reed.
He added that the “the levels of occupier activity during 2014 really underline the buoyancy of Edinburgh’s local economy, following several years of volatility.
“The final quarter, in particular, witnessed a significant increase in activity, with some indication that the figures were boosted by occupiers who were waiting until the outcome of the referendum before making property decisions.
“What’s clear going forward,” said Reed, “is that occupiers with lease events in the next two years will have far less choice than they have had for a number of years.”
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