Glasgow Office Market Update

Glasgow has seen the highest level of office lettings take-up in more than a decade in a new report by property consultancy CBRE. Take-up in Scotland’s largest city during the third quarter of 2019 has been “exceptionally strong”, according to CBRE, totalling just over 352,000 square feet – the highest level of Q3 take-up in more than ten years. The year-to-date total of office leases signed reached 611,712 sq ft. CBRE say that the total take-up for 2019 expected to bypass the five-year average of 700,974 sq ft following the strong Q3 performance.

Metropolis has run 72 leads on Glasgow office movers so far this year, with around 90 lettings recorded of over 2,000 sq ft. Researchers are talking to a further 120 office occupiers with lease expiries approaching in Glasgow over the next two years.

The Q3 figure was significantly bolstered by the letting of 272,858 sq ft at One Central on Argyle Street by JP Morgan Chase. Stream Technologies took 27,000 sq ft at 319 St Vincent Street. Of the remaining 24 deals, over half were under 5,000 sq ft, yet occupier demand for larger buildings remains high, as proven with the number of active requirements ongoing in Glasgow including from serviced office operators.

From total demand of 800,000 sq ft, there is strong underlying demand from the banking & finance sector from occupiers such as Barclays, Aviva and Chubb Insurance. WeWork is believed to be under offer on 77,000 sq ft at 50 Bothwell Street. A number of active larger requirements, should further boost take-up by year end, although in reality a two tier market is operating with demand for Grade B smaller offices more challenging. A greater number of smaller deals points to stable market which is less susceptible to fluctuation, than one driven by large individual deals.

Over the past five years Glasgow has seen employment growth of 19% in the professional, scientific and tech industries, and is forecast to see a further 12% growth over the next five years. This is projected to create an additional 4,000 jobs in these industries, suggesting strong demand from these sectors will continue. This is reflected in the current requirements in the market.

Overall Glasgow city centre office supply has risen slightly and now sits at 1,082,569 sq ft (a vacancy rate of 8.07%), with a further 185,222 sq ft rumoured to be under offer. There is now no ‘new build’ Grade A space available and none due to complete until late 2020.  There are some revamps with 151 West George Street, 55 Douglas Street, Ink Building and Sentinel all currently under refurbishment and due to complete in 2019. However the pressure on good quality space will continue over the course of 2019 and 2020.

Office Demand in Edinburgh and Glasgow

Both Edinburgh and Glasgow recorded strong office demand in 2014 with Edinburgh deals totaling 740,000 sq ft including large lettings to Standard Life, Rockstar and FNZ. In Glasgow take-up reached 686,000 sq ft including large transactions involving Network Rail, Cigna Insurance and Clydesdale Bank. Metropolis reported on 476 deals, expansions and requirements in the Scotland in 2014.

Looking ahead, Metropolis has just completed an analysis of current named office demand in the city centres of Scottish cities. The survey encompasses 80 different companies that have told Metropolis that they are looking for office space in Edinburgh, Glasgow and Aberdeen over the past 12 months 2014-15.

The current total of office space required by the 80 companies tracked by Metropolis, is 82,300 sq m (885,600 sq ft) as of April 2015. Edinburgh takes the lion’s share of demand with 41,000 sq m (441,300 sq ft) of named requirements, followed by Glasgow with 38,800 sq m (417,600 sq ft).

By sector, financial services dominates by volume (boosted by a large Morgan Stanley search in Glasgow), followed by media and business services. However, it is business services which has the highest number of individual searches, followed by IT, recruitment and media. Public services, including Government agencies, remain an important slice of the market. By size band, 22 searches are 930 sq m (10,000 sq ft) and above; 20 are between 5,000 sq ft and 9,999 sq ft, with the remaining 33 searches less than 5,000 sq ft. Metropolis has analysed the reasons for an office search and lease expiries tops the poll with 58% of searches, followed by expansion on 32% and new office bases on 10%.

The predicted upsurge of demand following the referendum has not yet materialised, but the largest current searches are Morgan Stanley, Aecom and Aegis Global in Glasgow, Pinsent Masons, Simpson & Marwick, WS Atkins and EY in Edinburgh. There are nearly 100 companies in Glasgow and Edinburgh approaching lease expiries in 2015 to 2017, including Deloitte, KPMG and Brodies which are yet to make a decision. Local agents are predicting that new redevelopments and refurbishments are imminent due to lack of grade A supply in both cities.