Foreign cash and need for premium space lead office deals in Central Belt

● Insiders forecast strong second half with UK a ‘safe haven’ despite Brexit

Overseas investment and strong demand for grade A space dominated office property activity in Scotland’s biggest cities during a below-par second quarter, new figures suggest.

Edinburgh was one of just two cities in Avison Young’s Big Nine report, with a heavy skew towards foreign investments in the period, with two global deals totalling more than £200 million.

This includes the purchase of 4-8 St Andrew Square for around £120m on behalf of a major German pension fund.

The Scottish capital also saw an uplift in headline rents to £36 per square foot, the highest of the nine cities featured, which exclude London.

The trend toward flexible workspace continued, with the two most significant deals in the capital being inked by co-working companies. Wework has taken 40,500 sq ft at 80 George Street in the city centre and Instant Offices took 35,600 sq ft at out-oftown Broadstone at the Gyle. Wework is also understood to be looking closely at the Glasgow market.

The key office letting deal in central Glasgow in the second quarter was hotel chain Hilton snapping up nearly 42,000 sq ft at the recently refurbished 191 West George Street.

There were also two deals for around 20,000 sq ft to artificial intelligence company Arm and financial services group JP Morgan Chase.

While total take-up in Glasgow was on par with the average quarterly figures, the halfyear results were down “significantly” compared to 2018, and the city is seeing “sizeable unsatisfied requirements” for grade A offices.

Avison Young expects the city’s full-year figures to substantially improve thanks to major refurbishments and transactions in the pipeline. There is more than a million sq ft under construction in Glasgow, such as Atlantic Quay, Buchanan Wharf and 177 Bothwell Street.

Stuart Agnew, principal and managingdirectoredinburgh, said he is optimistic of a strong end to the year for the Scottish market, regardless of the Brexit outcome. He said: “UK real estate remains a ‘safe haven’ asset and overseas investors continue to benefit from the weakened currency.

“With the Brexit deadline approaching, investment volumes may improve for the third quarter of 2019 as deals are accelerated prior to the 31 October deadline and then, dependent on the outcome, the final two months of the year could be perceived as an opportunity to recover from the below average levels of activity experienced in the first two quarters.”