Growth fear as city centre faces ‘critical’ shortage’

A “critical” shortage of Edinburgh office space is likely to persist throughout 2024, property advisers have predicted, despite the post-pandemic transition to home and hybrid working.

New figures from property consultancy JLL show that total office take-up in the capital last year totalled 661,000 square feet, with the largest deal being Analog Devices’ lease of 28,000 sq ft at 2 Freer Street. This total represents an 18 per cent reduction compared to the ten-year average of 806,000 square feet.

A total of 168 new deals completed in 2023. While a slight improvement on 2022’s figure of 151, deal volumes are 16 per cent below the five-year pre-pandemic average, demonstrating that occupiers are still reviewing their options and delaying their relocation decisions, JLL noted.

As a result, headline rents in the city centre have grown from £40 per square foot at the end of 2022 to £43 a 7.5 per cent year-on-year increase and 13.2 per cent up over the previous 24 months. JLL has attributed this to a shortage in supply of “bestin-class” office space.

It said strong demand for prime - or Grade A - space and growing concerns around inward investment was leading to apprehension that Edinburgh’s city centre might begin to inhibit business growth.

Hannah Done, associate director at JLL in Edinburgh, said: “It’s a hard-hitting fact that there is currently no availability of Grade A office space amongst Edinburgh’s build stock, and we anticipate that this trend will persist into 2024 without more speculative refurbishment from investors. A contributing factor to this has been the continued theme of obsolete office buildings.”