Lack of office space could harm capital

Group Business Correspondent

Tuesday 3 July 2012

EDINBURGH faces a shortage of grade A office space which could deter inward investors in spite of the challenges facing some firms in the key financial sector, experts have warned.

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MARK WILLIAMSON

GVA, a property consultant, said the shortage of finance for new developments combined with a lack of confidence among investors means little new space is coming on to the market at a time of strong demand for good accommodation. "There is a common misperception in Edinburgh's office market that the credit crunch and banking crisis led to the financial services sector dumping operational office stock on the market," said Toby Withall, national markets director for GVA Scotland.

"However, this is not the case and the vast majority of the operational stock remains occupied in both central Edinburgh and out of town. In addition, there is very little new grade A accommodation under construction in the city centre."The lack of suitable office accommodation could lead to upward pressure on rental values by as much as 20%." Mr Withall said demand for space is mainly being driven by occupiers coming to the end of their lease terms or have break clauses choosing to relocate.Blackrock, the fund management giant, has just agreed to take 80,000 sq ft in a new development in the financial district.However, the pressure on space partly results from Edinburgh's success in attracting some big inward investments in recent months. Amazon, the online retail giant, took 57,442 sq ft in the Waverleygate complex, while Avaloq, a Swiss banking software specialist, took 21,387 sq ft near the Botanic Gardens.Mr Withall said there is more pressure on supply in Edinburgh than in Glasgow. He noted that cities need to be able to offer large floor plate spaces to be able to attract inward investors.He said there is currently demand for more than 220,000 sq ft of grade A office space in Edinburgh, compared with 280,000 sq ft available. A further 226,000 sq ft is under development on Morrison Street but 48,000 sq ft of this has already been let.

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Lack of office space could harm capital

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