GVA’s Keith Aitken on how Edinburgh’s commercial property makeup has changed since he took up his current role ten years ago.

A decade is a long time in any game. When I joined GVA ten years ago, all areas of property except for industrial were on the up in Scotland.

Things were going great guns but then the first signs of a financial crisis appeared towards the end of 2007. Everyone knows what happened in 2008, but almost ten years on the country’s commercial property industry has not fully shaken off the post-crash hangover. Attempts to recover have been compounded by rising construction costs, occupier failures and a tumultuous political landscape.

In Edinburgh, some sectors have blossomed whilst others are under pressure and market failure has occurred. Hotels and tourism, residential and student accommodation have exceeded expectations.

The mantra of risk vs. reward is at the heart of real estate development but the legacy of the 2008 crash is that risk aversion is now the norm. Contrary to popular opinion, property developers are not all about profit but their need to satisfy shareholders and funders who were bruised by the economic downturn means that less risk, less reward is standard.

Edinburgh is unlike any other major city in the UK. Its world heritage status means planning conditions are complex. Bids for vacant sites must reflect the most viable use of these spaces to secure funding approval whilst the abolition of empty rates relief means developers can’t afford to hold an unoccupied asset.

The Local Development Plan correctly allows for a variety of urban uses in Edinburgh’s centre and this means that sectors such as retail, residential, student accommodation, restaurant and hotel developments have been able to flourish and are in immediate proximity to each other.

These are all key to a vibrant and successful city, but so is the humble office worker. Office development has lost out recently as this race for space quickens. Whenever sites suitable for offices become available in the city centre they are much sought after by alternative uses that drive greater value and have less risk. In addition there has been a jump in costs per sq. ft. to build a Grade A office space in the city. Today, it costs approximately £200 per sq. ft. to build. This is a substantial increase from 2007 when the average cost was 125-£150 per sq. ft.

Examples of assets that could have been used for offices but have not include the Premier Inn at York Place, Tune Hotels at Haymarket, serviced apartments at Lismore House, George Street and the University of Edinburgh at Lauriston Place.

India Quay, Fountainbridge is an example of where development has stalled. GVA was involved in the sale of this property just before the crash and the sum would have covered a large chunk of Cristiano Ronaldo’s annual salary.

Yet nine years on and other than a than a high school, an arts hub and a proposed hotel the site remains practically vacant. City of Edinburgh Council took advantage of the weak market conditions to snap it up on a competitive basis and build the school, but development has stalled. The question is why?

There’s no joined up strategic plan in place, no plans for offices and not enough dialogue between private and public sector to get things moving. India Quay had been touted as Edinburgh’s answer to Brindley Place in Birmingham. If any hope of this being the case is to be resurrected then stakeholders from across the public and private spectrum must band together to create a sustainable vision.

Conversely, New Waverley has made massive strides in the same time with office content due to welcome a major occupier to sit along three new hotels.

Office accommodation is expensive to build but must be considered for new developments.

It may not always be suitable due to cost but sites such as India Quay should bring public and private bodies together to allow true urban development to take place. In certain cases, public sector intervention will be required.

Scotland’s capital has earned plaudits as a financial powerhouse second only to London in the UK and as an excellent incubator for tech companies. But Edinburgh’s reputation as a place to do business will be at risk if the public and private sectors do not come together to boost office development.