Glasgow is badly in need of a new wave of city centre offices to attract potential corporate occupiers and inward investment into the city, according to a new property report out today.
Alison Taylor, head of business space Scotland at Bilfinger GVA, says that, with three new build towers completing this year and occupiers lining up to move in, she is surprised that the next round of development has not yet started.
Given it takes a minimum of two years to construct a prime quality office building, it is going to be into 2018 before a fresh supply can be delivered to the market. This leaves Glasgow poorly placed to compete against other regional UK cities for mobile projects and new jobs.
"HFD Property Group (Bothwell Plaza), Titan Investors (Broadway 2) and BAM Properties/Taylor Clark (Atlantic Square) all have well located, consented sites for Grade A office schemes and I would anticipate development activity commencing early in 2016 at one of these," said Taylor.
"The lack of new speculative development and new Grade A stock is beginning to lead to pre-let activity across a number of city centres across the UK and Glasgow is no exception."
Bilfinger GVA’s Big Nine cities report for Q3 of 2015 reveals Glasgow city centre office take-up as 119,164 sq ft, just below the five-year average, but the advisers believe that the full year figure will eclipse the strong occupier activity of last year, given a number of high profile deals are currently going through the legal process.
The report says the city’s market remains buoyant and has recently seen the £30 per sq ft rental barrier broken with WSP leasing 11,000 sq ft at 110 Queen Street.
Taylor also confirmed she is advising the first tenant to take space in Abstract’s St Vincent Plaza, where distillery firm Whyte and Mackay is in legal discussions on 17,295 sq ft. In addition, her firm is joint letting agent with JLL on 1 West Regent Street, where further announcements are expected shortly.
Other large requirements insurers AXA, engineers Jacobs, law firm DWF Biggart Baillie and accountancy body ACCA are all tipped to make final decisions before Christmas.
As reported here previously, it is also anticipated that Morgan Stanley will sign a 150,000 sq ft pre-let, boosting year-end take-up a long way above normal expectation.
It’s a similar story in Edinburgh, with limited activity on the next round of development and anything in the pipeline unlikely to be completed before 2018.
Peter Fraser, GVA’s associate director, said: "There is 320,000 sq ft under construction due to complete in 2016/17, but already half of it has been pre-let to Standard Life Investments (108,500) and Fanduel (58,000), with further substantial pre-lets expected this quarter.
"New development includes schemes such as Capital Square (153,000 sq ft), West Register Street (60,000), Semple Street (40,000) and New Waverley (160,000). We estimate that more than 400,000 sq ft of city centre lease expiries between 2016 and 2018, with current Grade A supply levels less than 180,000 sq ft."
Both cities have seen a possible knock-on in appetite for out of town business parks. Fraser said there had been a turnaround in West Edinburgh since the recession, when some existing occupiers scaled back operations.
"This landscape has been changing and rents have been edging up from historic lows," he said. "Given current market demand we expect Edinburgh Park availability to fall as low as 60,000 by the spring. This will put pressure on prime stock levels right across the capital until the next wave of development completes."
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