Record year sees supply of prime office capacity  drying up and rents set to rise
as a result, says Bob Serafini

Edinburgh’s office market is feeling the pinch, with occupier take-up heading for a record year and a fall in vacancy rates placing a strain on supply across the capital.

Commercial property agents are often accused of talking up the market in the hope of speeding up a deal, but a string of recent statistics and predictions from leading consultancy firms like JLL, Ryden, CBRE and GVA are sending out a clear and consistent enough message.

There will be no big new office developments being completed for at least two years, rentals – already at £30 per sq ft and higher for pre-lets – are only heading in one direction, and companies without a property strategy are going to be in trouble.

Take-up to September was already 605,000 sq ft and is set to significantly surpass the five year average total of 650,000.

Vacancy rates have decreased to only five per cent, and the development pipeline is increasingly restricted by new projects being pre-let well in advance of completion.

JLL director Cameron Stott said the increasing trend to convert older office properties into hotels, residential and student accommodation was adding to the problems, with a significant drop in the levels of quality office space available.

“JLL research suggests there is strong occupier demand in the next two to four years, which will be in line with the next wave of development, not expected to reach practical completion until late 2017.”

The only prime office building due in 2016 is Quartermile 4, already heavily pre-let to Fanduel, with the rest rumoured to be lined up for Cirrus Logic.

Several sites have planning consent, including Chris Stewart’s Mint building (60,000 sq ft), Hermes and Parlison’s Capital Square (122,000), and Tiger and Interserve’s Haymarket scheme (40,000 of the 90,000 sq ft first phase believed to be the preferred choice of Ernst & Young).

The other options are either design and build or building refurbishment.

One landmark office building, relaunched this week with a change of name after it was purchased for £32.2m in September, could be set to deliver an early return for its new owners.

Westport 102, now called Mainpoint, was acquired by investment manager Cording Real Estate Group for Britannia Invest, an investment company for Danish pension funds.

The 95,174 sq ft Grade A building, where tenants include Audit Scotland, Scottish Ministers, and a Sainsbury Local at street level, is 76 per cent let, with three suites totalling 22,774 sq ft of space available through
CuthbertWhite and Eric Young & Co at rentals of £19.50 to £27 per sq ft.

Cording’s investment director Ewan Montgomery said: “With the relaunch of this spectacular building in the capital reflects our confidence in Edinburgh’s prime office emarket.

“With a BREEAM very good rating, highly specified space and extremely low availability of Grade A offices in the city centre, we feel we are well placed to secure full occupancy.”

A spate of deals this month has seen the first tenants for the Citywest office scheme at Robertson Avenue, a mile west of Haymarket station.

This speculative building by J Smart & Co (contractors) plc has signed Scotland’s largest publisher of children’s books, Floris, and a company which processes visa applications, TLS Contact Ltd. The two have taken 1851 and 1421 sq ft suites on
the fourth floor, at a rental of £16 per sq ft.

Lewis Pentland of Bilfinger GVA, joint agents with Ryden, said: “Feedback on the quality and design of the building has been excellent and we are seeing good levels of interest in the remaining space, suitable for requirements from 2088 to 20,000 sq ft.”

Holyrood Communications, which runs policy events and publishes the current affairs magazine Holyrood, has moved to new premises at Panmure Court on Calton Road.

MD Mandy Rhodes said she was looking forward to having all staff on one floor in a modern open plan office close to the Scottish Parliament: “We are also very happy to welcome any passing politician in for a cup of tea and a light grilling.”

Peter Fraser of Bilfinger GVA advised on the 2600 sq ft move: “Panmure Court has three commercial units at ground level with student housing above. Holyrood’s move sees the development fully occupied, joining Shaw Marketing and student provider Unite.

“This part of town is becoming a media hub, with PR companies Message Matters and Big Partnership nearby.”

Ryden acted for the landlord, with rentals around the £14 per sq ft mark.