Offices are losing out in the Capital race for space
Keith Aitken calls on public and private sectors to get together and provide a boost for business
Alot can happen in ten years. When I joined commercial property firm GVA a decade ago, all areas of property except for industrial were on the up. Initial signs of a financial crisis appeared towards the end of 2007.
Everyone knows what happened in 2008, but almost ten years on Scotland’s commercial property industry has not fully shaken off the post-crash hangover. Attempts to recover have been compounded by rising construction costs, occupier failures and a tumultuous political landscape.
In Edinburgh, some sectors have blossomed whilst others are under pressure and market failure has occurred. Hotels and tourism, residential and student accommodation have exceeded expectations.
The mantra of risk versus reward is at the heart of real estate development but the legacy of the 2008 crash is that risk aversion is now the norm. Contrary to popular opinion, property developers are not all about profit but their need to satisfy shareholders and funders who were bruised by the economic downturn means that less risk, less reward is standard.
Edinburgh is unlike any other major city in the UK. Its world heritage status means planning conditions are complex. Bids for vacant sites must reflect the most viable use to secure funding approval whilst the abolition of empty rates relief means developers can’t afford to hold an unoccupied asset.
The Local Development Plan correctly allows for a variety of urban uses in Edinburgh’s centre and this means there is now retail, residen- tial, student accommodation, restaurant and hotel developments in immediate proximity to each other.
These are all key to a vibrant and successful city, but so is the humble office worker. Office development has lost out recently as this race for space quickens. Whenever sites suitable for offices become available they are much sought after by alternative uses that drive greater value and have less risk.
India Quay, Fountainbridge, is an example of where development has stalled. Other than a high school, an arts hub and a proposed hotel the site remains vacant almost a decade after being sold on several occasions. Why? There’s no joined up strategic plan in place, no plans for offices and not enough dialogue between private and public sector to get things moving.
Conversely, New Waverley has made massive strides with an office content due to welcome a major occupier to join three new hotels. Office accommodation is expensive to build but must be considered for new developments.
Sites such as India Quay should bring public and private bodies together to allow true urban development to take place. In certain cases, public sector intervention will be required.
Scotland’s capital has earned plaudits as a financial powerhouse second only to London in the UK and as an excellent incubator for tech companies. But Edinburgh’s reputation as a place to do business will be at risk if the public and private sectors do not come together to boost office development. ● Keith Aitken is regional senior director for GVA in Scotland.