It points out that overseas investors, particularly German funds, are increasingly open to investing in Scotland and are looking outside London for more attractive yields. ‘The reason for the increase in activity is largely a result of lease events, improving energy sector confidence and increased landlord flexibility relative to lease terms,’ said Dan Smith, director of office agency for Savills Aberdeen.
Overall take up reached 393,000 square feet during the third quarter of this year, taking the amount so far this year to 1.8 million square feet and it is expected that large Government Property Unit (GPU) requirements and a modest recovery in the oil and gas sector will drive the full year’s Scottish office take up volumes above the 10 year average.
Scotland as a whole is expected to see office based employment grow at a slower rate than the UK average of 4.6% over the next five years. However, both Edinburgh at 5% and Glasgow at 4.7% are set to see office based employment outperform the national average during this period, driven by strong growth in professional, science and tech sectors.
The report explains that whereas decision makers sat on their hands during the second half of 2016, occupiers have realised that Brexit is a process, not an event and occupational decisions must continue to be made.
Aberdeen office take up reached 84,000 square feet in the third quarter of 2017, amounting to 325,000 for the year to date, over twice the total at this stage last year. However, availability rose to 2.6 million square feet over the past quarter. ‘We believe that availability has now peaked in the Aberdeen market, with no more speculative developments in the pipeline. We expect headline rents for the very best space to remain in excess of £30 per square foot with incentives continuing to challenge landlords,’ the report says.
Edinburgh’s wider market take up in the first three quarter of the year reached 976,000 square feet, already 9% above the five year annual average. Some 701,000 square feet of this was taken in the city centre and it is the only Scottish city with office developments under way with 100,000 square feet of new space under construction in the city centre. The report says that the shortage of Grade A space in Edinburgh points to the possibility of a £0.50 per square foot increase in top rents to £34 per square foot by the end of the year for a top floor suite.
Take up in the wider Glasgow market reached 539,000 square feet in the same period of which 290,000 was taken in the city centre. Only 62,000 square feet was taken in the city centre in the third quarter with all deals below 10,000 square feet. Out of town, Glasgow take up remains strong, reaching 249,000 square feet, some 3% above the five year average for this stage in the year while availability in the city centre fell to 1.7 million square feet of which only 471,000 square feet is Grade A specification.
The report predicts that top rents in Glasgow will remain stable at £30 per square foot until new speculative developments are announced. There are however a number of refurbished schemes which are set to provide 192,000 square feet of space by the end of the first quarter of 2018, which could see an increase in average rents over the next 12 months.
Savills Research have tracked prime office yields across the Scottish cities over the past five years and analysed the impact that political scenarios have had. Whilst the rest of UK yields have been on a steady inward trend during 2015, Scottish office yields moved out after the 2015 general election. The 2016 EU referendum increased further speculation regarding Scottish independence, though the Scottish National Party’s loss of seats in the 2017 general election has turned investor focus back towards Scotland, hardening prime yields.
Source : www.propertywire.com