Best quarter for Aberdeen

Recent research from CBRE reveals that in the third quarter of 2016, office lettings in Aberdeen reached 66,174 sq ft. This total made it the best performing quarter in Aberdeen so far this year.

The cumulative Aberdeen take-up volume for the first nine months of 2016 was 152,683 sq ft, below average levels for the end of the third quarter. The low oil price continues to impact on office demand although a recent increase in crude prices to $51, is signalling a possibly better year ahead.

The largest Aberdeen letting to take place in Q3 saw serviced office operator Citibase acquire a 22,000 sq ft west end office building at 9 Queens Road. Within the city centre, another floor of nearly 6,000 sq ft has been let to HM Ministry of Justice at AB1, Orega, the serviced office provider, has signed to take 26,000 sq ft on the 1st and 2nd floors at the under construction, 9-storey ‘Silver Fin’ office scheme in Aberdeen.

Metropolis is tracking around a dozen office searches and potential searches in Aberdeen.

Total office space available at the end of the third quarter reached a new high of 2.45m sq ft, which is a year-on-year increase of 45% from Q3 2015. Muse’s 170,000 sq ft Marischal Square development is also under construction and will complete in Q2 2017.

Prime office headline rents in Aberdeen are unchanged at £32 per sq ft, with an absence of recent prime transactions to challenge the current level.

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South Coast steady

JLL has just published its Q3 2016 report on the ‘South Coast Metropole’, covering Portsmouth, Southampton and Bournemouth. The headlines are that prime building office rents reached £21.50 per sq ft; there has been a 6% increase in take up from this time last year and there is a shortage of new office schemes coming through the pipeline. The market has generally stabilised after the initial shock of the Brexit vote.

In Q1 – Q3 2016 there has been a 16% increase in take-up compared to the same period last year. Take-up has risen from from 337,366 sq ft in 2013 to 419,160 sq ft in 2014 and to over 500,000 sq ft in 2015. The largest letting over the last year was Utilita Energy which took circa 52,000 sq ft at Hutwood Court, Chandler’s Ford. More recently Just Develop IT  took 25,000 sq ft at Segensworth; Peach Telecom took 14,000 sq ft at Fareham and One Insurance took 12,500 sq ft at Chandlers Ford.

The south coast remains a popular location for businesses in the defence, technology and financial sectors. JLL point to a trend for larger occupiers moving to out-of-town locations due to lack of suitable new schemes in city centres.

Metropolis is tracking over a dozen companies looking for over 10,000 sq ft of offices in Portsmouth, Southampton and Bournemouth.

The occupational market in the region is being been driven by lease events with companies consolidating into single buildings or relocating to take advantage of newly refurbished, better quality accommodation, often from cellular offices into more modern open plan space.

Speculative office development has been quiet with the exception of one building at Southampton Science Park and in Bournemouth, One Vision is currently under construction as part of a mixed use scheme where offices will be provided up to 83,300 sq ft by 2018. Development sites at Royal Pier Waterfront in Southampton, Lakeside Northarbour in Portsmouth and Chilcomb Centre in Winchester may as a result, see new offices built, as supply continues its steady decline.

Edinburgh prospering

A recent report on the Edinburgh office market by property adviser Knight Frank, concluded that around 120,000 sq ft of offices were let in Q3 2016. The July-September 2016 total was slightly down on the first two quarters of the year, but broadly in line with the same period in 2015 (148,000 sq ft).

Technology, media, and telecommunications (TMT) sector companies were the mainstay in the market, accounting for 49,000 sq ft of the Edinburgh-wide take-up – 41% of the total.

Agreed deals included moves by People’s Postcode Lottery, State Street Bank, Intergen, Cirrus Logic and Zonal Retail Data.

The agents said that appetite for Grade A space (newly completed or refurbished) also “remained voracious in the city centre, with 176,000 sq ft  let in the year to date”. Knight Frank say that Edinburgh could outperform the 220,000 sq ft 10-year average for annual city centre, Grade A office take-up, by the end of 2016.

Metropolis is currently tracking some 35 searches for Edinburgh office space 2016-18.  Current large requirements include Ernst and Young (under offer at Atria), Brodies (60,000 sq ft) and Aberdeen Asset Management (80,000 sq ft).

Agents say: “There is a good level of requirements in the market, particularly for sub-5,000 sq ft accommodation. The level of demand should give developers the confidence to start building. Many will be holding out for pre-let opportunities and, although there have been few in the last decade, we’d expect to see more announced towards the end of 2016.”

Speculative schemes include work nearly completed at Quartermile 3, some delay at the Haymarket scheme, construction planned at One Lochrin Square and a start on Chris Stewart Group’s ‘the Mint’ building, where space is under offer. KF also said that landlords are looking to refurbish their existing stock.

 

July 2016 Central London Lettings

Central London office lettings in July 2016 recorded just over 830,000 ft of deals from 35 mid-large size transactions (5,000 sq ft+) during the month. The July figure represents a major increase on the 640,000 sq ft in June and brings some signs of activity returning after the poor Q2.

July was characterised by 12 office deals over 20,000 sq ft, including Wells Fargo Bank at the under construction 33 Central, EC4; PA Consulting at the under construction Verde scheme, SW1; Guys & St Thomas NHS at Becket House, SE1 and Exterion Media at the recently-completed Lacon House, WC1

Financial services topped the table of lettings by sector, helped by the Wells Fargo deal. This was followed by professional sector, boosted by PA Consulting’s pre-letting. Media and business services are also performing well. Office deals under offer in central London remain around 2.9m sq ft and include two large pending deals in Midtown.

By area, the City accounted for 65pc of the office floorspace let in July. The West End saw 150,000 sq ft of take-up. Southbank had a good month helped by the Guys & St Thomas deal. Current London office demand is calculated to be around 4m sq ft in the City and 3m sq ft in the West End.

The volume of grade A (newly built or refurbished office space) let during the month hit an impressive 429,000 sq ft (52% of the total), as transactions for new space recovered slightly in July.

New research from Metropolis reveals there are some 400 medium/large companies in central London which have yet to make decisions on leases due to expire in 2017.