The independent commercial property consultancy said that during 2023 prime office rents rose by 8% from £40 per sq. ft. to £43 per sq. ft. This was the largest increase since 2015’s 11% and well ahead of the 5% annual average since 2014.

Despite the challenges the Covid-19 pandemic presented to the office market and the shift towards hybrid working, prime rents have risen in Edinburgh from £35.50 at the end of 2019 to their current level – a 21% increase.

Knight Frank’s analysis suggests that continued demand for space and a constricted development pipeline could push prime rents in Edinburgh city centre up again by the end of 2024. Edinburgh’s overall vacancy rate remained at around 11% during the second quarter of the year, but new and second-hand Grade A availability has fallen to less than 0.4% and 6.7% respectively.

Andrew Hill, lease advisory partner at Knight Frank Scotland, said: “Rents for prime offices in Edinburgh have risen at a significant rate in the last 12 months. A big contributor to this has been the flight to quality we have seen since the Covid-19 pandemic, with occupiers favouring quality space in prime locations, with good access to amenities. At the same time, there has been very limited supply of stock coming through and that has put upward pressure on rents for in-demand properties.

“With so little in the development pipeline and a lot of existing office space being repurposed for other uses, the Grade B and C properties are also holding up well. There is a particular lack of stock in the city centre for smaller suites of below 5,000 sq. ft., which is one of the main contributing factors to rising rents in these markets.

“As a result, it’s more important than it has been for some time for landlords and occupiers to begin discussions early when lease events are on the horizon, seek representation from an adviser, and collaborate over any planned changes to rents.”