Commercial property consulting firm GVA has released a report stating that demand for top-notch office space in Edinburgh is so high that the city could run out in the next 18 months. Edinburgh has seen demand for office space increase by one-third between April and June of 2011 alone. The underlying cause of the supply drought is the severe restrictions on financing for new building projects. Lack of private sector confidence only serves to compound the issue.
The consulting firm is strongly recommending measures be put in place now for urgent development of Grade A office space. During the past 12 months, the Scottish capital has seen a high level of activity in the office space market. The amount of available stock diminished rapidly, and transactions which are currently being negotiated will make the current market conditions even tighter.
While the general public may be under the impression that the global credit crunch and banking crisis lead to companies in the financial services industry closing offices and freeing up operational stock in the Edinburgh market, this has not been the case. Most main banks have remained open in offices located in central Edinburgh and out of town.
Only two new Grade A office sites are currently under construction in Edinburgh’s city centre. Both of them are located on Morrison Street.
A number of commercial tenants have leases which will expire in the years 2013-15, and demand for office space in Edinburgh will continue to increase. Landlords will be in the enviable position of being able to charge higher rates for space which does come available, and GVA is predicting that pressure on rental values may increase by as much as 20 per cent. Firms which are looking to renew a lease or find new office space may be interested in locking in their rate over a longer term if the city does run out of Grade A commercial space.
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