EDINBURGH’S growing population and popularity with tourists could prove a threat to its status as a top location for businesses, according to a new report by Knight Frank.

The property consultancy said there is a lack of development land in the Scottish capital that has hindered the delivery of new office space and of 338,000 sq ft of Grade A space due by the end of 2021, 35 per cent is already let to occupiers.

The firm said that the arrival of WeWork’s first co-working space in Scotland at 80 George Street would lead to a “big change” in Edinburgh’s office market and could act as a catalyst for other operators to set up in the city, with a number already showing interest.

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Knight Frank, unveiling its Edinburgh 2019 report, said the population rose 12.5% in the 10 years to 2017 and visitor numbers reached 4.26 million.

It said while hotels and homes are important for the city, a balance needs to be struck to stop the “unsustainable” rate of conversion from offices.

Alasdair Steele, of Knight Frank, said: “Tourism has proved a double-edged sword for Edinburgh. Visitors coming to the city and spending money is great news for hotels and retailers, but it’s had unintended consequences for other sectors.

“The supply of office space is reaching perilous lows and rents continue to rise for space in Edinburgh’s core."

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He said: "At the same time, the city’s population is growing at a robust rate and, combined, these pressures are taking space from the business community at an unsustainable rate.

“In time, this could prove to be a chokehold on the city’s growing companies, particularly those which would normally come out of serviced accommodation or incubators. Typically, they would look to take Grade B space, but with just 220,000 sq ft available in the city centre, only a third of what’s available in Glasgow, there is little to choose from.”