Edinburgh office sector solid despite slide in Q1 take-up

● Property experts highlight build-up of occupier requirements hitting market

office market remains “strong”, property experts have insisted, despite a sharp drop in take-up during the first three months of the year.

Reports released yesterday by two commercial property consultancies revealed a big fall in lettings in the capital in the first quarter following a record year of take-up in 2017.

CBRE Scotland said the city’s office market had experienced a “challenging start to 2018” with some 115,000 square feet of take-up. It said the figure marked a 42 per cent decrease from the opening quarter of 2017, when a number of large deals slipping out of the final three months of 2016 bolstered the result.

Allan Matthews, a director in the advisory and transaction services team at CBRE, said: “While the Q1 take-up figure represents a significant yearon-year decrease, it should be noted that there was no ‘hangplete over’ of big deals from Q4 2017, with all major lettings completing prior to year-end, contributing to a record take-up for 2017 as a whole.

“With a number of substantial active requirements currently progressing, we anticipate take-up increasing significantly in the coming months.”

The firm also highlighted the continued squeeze on new space hitting the market, with total city centre supply falling to some 1,100,000 sq ft – less than half of the total supply figure of Q1 2013.

Matthews added: “Despite this seemingly slow start, conditions remain strong into 2018. Options for immediately available brand new Grade A space are still extremely limited, and with only 38,648 sq ft scheduled to complete at 2 Semple Street this year, supply levels will remain critical.”

In addition to the completion of 2 Semple Street this July, construction to boost the city’s Grade A office supply will continue throughout the year, with 65,000 sq ft at Chris Stewart Group’s development The Mint Building due to comedinburgh’s in early 2019, and BAM and Hermes’ joint venture Capital Square expected to deliver a further 122,000 sq ft in the second quarter of 2020.

Stewart Taylor, senior director at CBRE, added: “Based on the five-year average, the city has less than one year of Grade A supply. Add in the three speculative schemes under construction and that rises to a little over one year – but a significant percentage of that space is rumoured to be under offer.”

Meanwhile, Knight Frank said its analysis showed that 460,000 sq ft of new occupier requirements came onto the market in the first three months of the year from companies looking to lease office space in Edinburgh.

Notable agreements within the period included Spaces taking 30,000 sq ft at One Lochrin Square and engineering consultancy Sweco acquiring 15,000 sq ft at Quay 2.

Simon Capaldi at Knight Frank, said: “While Edinburgh has recorded a lower Q1 takeup than the same time last year, there’s still a positive story to tell of the city’s office market as a whole.”