The Big Nine quarterly review shows the take-up in the major regional office occupier markets in the UK, including Edinburgh and Glasgow.

The consistent theme of the post-pandemic shutdown has been the demand for new grade-A developments which continues to outstrip supply. Inevitably, this means the best properties command a premium.

In Glasgow, there is currently 655,000 sq ft of development under construction in Glasgow, with 55% of that space pre-let or pre-sold. Availability of stock has fallen by 14% since Q2 2022 with a 10% decrease on the 10-year quarterly average.

At the same time, Grade A availability is 89,000 sq ft, which makes up just 4.4% of stock currently on the market, but Glasgow has seen several refurbishments of grade-B space.

Simultaneously, rents for prime city centre offices remain stable at £35.25 per sq ft. Rent-free periods also remain steady, but are expected to move out next quarter. 

Some tenants are downsizing due to changing working patterns as more employers are offering flexible working arrangements for staff.

Paul Broad, principal & head of business space, Scotland, at Avison Young Glasgow, said: “Take-up in Glasgow remains low compared to pre-Covid levels however prospective occupiers are looking to high specification offices. To accommodate such demand, we are seeing increased refurbishment and repositioning of grade-B space to grade-A.

“Occupiers are taking break options and making decisions earlier than they normally would. This ‘first mover advantage’ is allowing tenants to beat competitors to good quality space, manage their fit-out timescales more effectively and is acting as a driver for market activity at present.

“Glasgow’s restricted development pipeline should go some way to supporting grade-A rents in the face of subdued take-up of all new developments currently under construction in Glasgow.”

Availability of stock has fallen by 14% since Q2 2022 with a 10% decrease on the 10-year quarterly average. This drop in available stock was somewhat expected given the subdued development pipeline.

Although take-up is down on last quarter and remains low compared to pre-Covid levels, there have been some notable deals. The largest within the Glasgow market was at 177 Bothwell Street for Evelyn Partners.

In Edinburgh, city centre availability is down 25.2% on the 10-year quarterly average, while prime rents have reached £40 per sq ft. Haymarket square (390,000 sq ft) is the only office development under construction and is fully pre-let. It’s unlikely Edinburgh will see any new city centre office completions for around three years so the immediate focus is on full building refurbishments to deliver the stock which occupiers seek.

Edinburgh has also experienced growth in take-up figures with 76,000 sq ft more space transacted in Q2 2022.

The only office development currently under construction in Edinburgh is the fully pre-let Haymarket Square (390,000 sq ft). With no imminent construction starts in the centre it may be another three to four years before Edinburgh’s next new office completion.

Therefore the focus will be on retrofitting existing buildings such as New Clarendon House (37,000 sq ft), 60 Morrison Street (85,000 sq ft), 30 Semple Street (50,000 sq ft) and 24-25 St Andrew Square (58,000 sq ft).

Peter Fraser, director, Avison Young in Edinburgh, added: “Edinburgh’s diverse tenant base supported take-up this quarter, which performed in line with average levels for the first time this year.

“While the availability of grade A stock contracted this quarter, availability of secondary stock has expanded, moving outward by an average of 10% per quarter over the past two years - if tenants want less space, they want the best space for the price.

“Tenants are willing to commit to excellent quality offices in city centre locations for long terms and at prime rents—but lack of prime stock within the city centre has led to some occupiers considering midtown or out of town business park destinations.

“Capital Square is a prime example of a sustainable grade A office building with the excellent green and wellness credentials occupiers seek and secured three new tenants during Q3. We understand the new tenants have signed 10–15-year lease terms at rents of upwards of £38 per sq ft.”