First quarter of 2017 “remarkably” strong for Edinburgh
Edinburgh’s office market returned a strong Q1 2017 as supply continued to hit fresh lows and demand from occupiers remained buoyant, according to analysis from Knight Frank.
The independent real estate consultancy found that there was 195,000 sq. ft. of occupational transactions, occupiers looking to take space for business purposes, in the first three months of 2017. This outperformed the 10-year average of 150,000 sq. ft. for the quarter and compared against 199,000 sq. ft. during the same period last year.
Nearly three-quarters of activity was in the city centre, 120,000 sq. ft., where availability is particularly low – new-build Grade A supply is now well below 1% and overall office vacancy in the city centre stands at 4.8%. At the same time, demand from the city’s businesses has remained resilient, with a large amount of requirements still on the market.
Technology, media, and telecommunications (TMT) companies were once again the most active occupiers in the Edinburgh market during Q1 2017, accounting for 30% of the total take-up. The sector’s activity outstripped the professional services, financial services, and banking sectors, which have traditionally been the principal players in the city.
Simon Capaldi, Associate at Knight Frank, said: “The first quarter of 2017 has been remarkably strong for Edinburgh – it could have been even better, but some deals have slipped by into the next period. We’re confident the city centre will perform well again in Q2 this year and would expect to see an increase in take-up from 2016. The impending decision for the Government Property Unit’s requirement could make the year ever stronger.
“Supply continues to diminish to fresh lows and demand remains robust in the face of many business uncertainties. Occupiers looking for Grade A space now have very few options to consider in the city centre, with the recently-launched One Lochrin Square the only viable choice for companies looking for this type of accommodation. No new-build offices will come onto the market for the next two years, at least.
“Nevertheless, Edinburgh’s office market continues to diversify. In the last few days, State Street announced its intention to take space at Quartermile, which was previously seen as a hub for tech firms – one of its biggest occupiers is now a major financial services company. For many businesses though, the market dynamics will mean they need to think carefully about their next move – the continuing squeeze on city centre space and rising rents will mean they need to look beyond Edinburgh’s core.”