Edinburgh office market poised to break the million

● Forecast for take-up of ‘well over’ one million square feet follows ‘steady’ Q3

Edinburgh’s office market is set for a record-breaking year, with well over a million square feet of space taken up by companies and organisations, new research indicates.

The 2017 total would be well up on last year’s 780,000 sq ft and mark only the second time in the capital’s history that the annual figure has exceeded one million sq ft.

Commercial property consultancy JLL Scotland said its year-end forecast followed a steady third quarter of activity in the city’s office market.

In total, about 200,000 sq ft of space, spanning 35 deals, was transacted in Edinburgh during the three months to the end of September, up almost 50 per cent on the same quarter last year.

The total take-up for the year to date has reached some 974,000 sq ft, already slightly ahead of the long-term average for a full year, suggesting that the final tally will be “well over” one million square feet, JLL added.

The largest deal of the third quarter was Aberdeen Standard Investments taking 69,000 sq ft at 10 George Street further increasing its presence at the east end of the city, around St Andrew Square.

Thenumberofrequirements in 2017 so far has increased by 12 per cent from the same period last year. The average deal size was 5,500 sq ft and JLL said it was involved in 40 per cent of transacted space during the quarter.

Meanwhile, the city-wide vacancy rate at the end of the second quarter stood at 4.4 per cent. This has since dropped to about 4 per cent with the city centre Grade A vacancy rate estimated at just below 1 per cent.

JLL said a significant “skewing”factorinthehalfyearspike was the UK government’s decision to locate a new 190,000 sq ft hub at New Waverley. The move, which marks the biggest single office leasing deal in Edinburgh for more than 20 years, will involve the relocation of about 2,900 full-time civil servants into the Grade A city centre premises by 2020.

Property experts said the city continues to attract “businesses with global reach”, particularly within the technology, media, and telecom (TMT) sector, with the latest example being Skyscanner’s parent company Ctrip. It announced plans last month to open a customer service call centre in Edinburgh, creating up to 200 jobs.

Craig Watson, director at JLL, said: “The first nine months of 2017 have been particularly active with a number of large deals helping to boost the capital’s take-up figures.

“As has been the case for some time in Edinburgh, a declining vacancy rate and a lack of new office developments has fuelled demand and restricted choice for occupiers in our market.

“Vacancy rates have dropped again in this quarter, but we do predict that new speculative office developments will begin in the coming months and into early next year which should begin to provide relief when complete. Prime headline rents are set to rise across the development pipeline.”