Edinburgh Office Market Update

Metropolis ran nearly 50 business leads on Edinburgh occupiers relocating in the early months of 2019. There are nearly 200 office occupiers approaching lease events in the city in the next two years. Recent expansions are showing a rise in the number of financial services and technology companies taking space.

In Q1 2019, total office letting in Edinburgh reached 185,000 sq ft, of which nearly 60,000 sq ft was Grade A new office space. Figures from Savills show that 90% of Grade A deals came from Tech industries. The largest deals included Amazon signing for 30,000 sq ft at Exchange Crescent and Epic Games taking 10,000 sq ft at Quartermile 2. Over the past five years, Edinburgh has seen employment growth of 7% in the professional scientific and tech industries and is forecast to see a further 11% over the next five years.

Avison Young spotlight the wider Edinburgh office market, which also saw large deals. Two of the largest deals freehold purchases out-of-town with 49,000 sq ft to the Church of Scientology at Westfield House and 12,000 sq ft to Sime Hospitality at South Gyle Business Park. There were other mid-sized deals to CGI and Upward Mobility. Lloyds Bank is expanding into a 75,000 sq ft technology hub at its Scottish Widows’ headquarters.

In the centre of Edinburgh there has been a high concentration of sub 5,000 sq ft deals, with tech firms have particularly active in this size bracket, accounting for 33% of all take-up.

Analysts expect a boost in take-up for the business services sector over summer 2019, with a number of buildings under offer to providers of co-working serviced office space.

Avison Young reveal that overall availability in the city centre amounts to 448,000 sq ft, which is less than a year’s supply based on the recent past demand. Although future supply was boosted when M&G Real Estate has instructed Qmile Group to build its mixed-use Haymarket scheme, which includes 350,000 sq ft of office space. There is currently around 55,000 sq ft remaining at Capital Square ahead of completion in May 2020, 2 Semple Street has 35,000 sq ft available, and 30,000 sq ft of sub-let space is on offer at 20 West Register Street.

Looking ahead, with a vacancy level of 3%, more pre-letting looks likely. Metropolis is tracking around 30 confirmed and potential medium/large office searches in Edinburgh.

Edinburgh’s Strong 2nd Quarter

Recent research by CBRE Scotland has pointed to a strong second quarter for Edinburgh’s office market, after a slow start to the year. Figures show a Q2 take-up of 351,916 sq ft of take-up – a 150% increase in take-up from Q1 2018, bringing office take-up in the first half of 2018 in Edinburgh to just under half a million sq ft (491,885 sq ft).

The recently announced pre-let to asset management firm Baillie Gifford taking over 60,000 sq ft at the newly developed Mint Building in St Andrew Square was possibly the stand out deal of the quarter, followed by other large lettings including 43,801 sq ft at 11-12 Lochside Place to Diageo and 14,832 sq ft at Atria One to EDP Renewables. The largest deal of the quarter was Edinburgh Palette (a workspace facility) occupying 109,153 sq ft of space at 525 Ferry Road, albeit on a short-term lease.

Metropolis is tracking around 40 occupiers searching for office space in Edinburgh. In general, tenant demand is considered to be buoyant, with a number of existing occupiers approaching lease expiries and seeking to relocate.

Meanwhile in the mid size range: The Scottish Public Services Ombudsman (SPSO) took 16,568 sq ft of out of town space at Bridgeside House, a Smart development at MacDonald Road, while Instant Offices, the serviced office provider, took 2,230 sq m (24,000 sq ft) of offices at the Cornerstone Building in South Gyle.

Total Edinburgh office supply remains at a low level at 923,540 sq ft, with 225,231 sq ft for city centre Grade A space. This represents a 30% decrease on the available space from the same period in 2017. The next scheme to complete is 2 Semple Street in Edinburgh city centre, which is due to be ready for occupation at the end of July 2018,  providing 38,648 sq ft of Grade A office accommodation across six floors.

CBRE say that there continues to be a number of larger, unsatisfied requirements for Edinburgh city centre.

Edinburgh office surge

A report this week by Edinburgh property consultant CKD Galbraith indicated that Q3 2013 office take-up in Edinburgh had reached 270,000 sq ft; which is up sharply on previous quarters.

The relocations announced were dominated by five big lettings: 85,000 sq ft at 3 Lochside Avenue to Sainsbury’s Bank; 33,000 sq ft to Jardine Lloyd Thompson at 7 Lochside Avenue; 55,000 sq ft at Capital House to Bank of New York Mellon; 32,000 sq ft at Atria One to PwC and Skyscanner taking a further 10,000 sq ft at Quartermile One. These five deals accounted for 80% of space transacted.

Research by Metropolis suggests there are still some 40 firms searching for space in Edinburgh, however most are looking for below 20,000 sq ft. A number of deals are currently ‘under offer’.