EDINBURGH is facing a “crunch point” because no new office space is under construction in the city centre, despite a strong rise in demand, a prominent property firm has declared.
Knight Frank said there is no new space under development in the city that has not already been pre-let.
The agent notes that while more than 400,000 square feet of major new build and refurbishment projects are set to be completed over the next two to three years, 746,950 sq ft of requirements have been issued already during 2022 for city centre space, at an average size of around 5,100 sq ft.
It cited the appeal of the Haymarket Edinburgh development, where tenants will include Capricorn Energy, Shepherd and Wedderburn and Baillie Gifford, as a sign of the huge demand for space and the “wider flight to quality accommodation”. Knight Frank said Haymarket Edinburgh is fully let ahead of its first building being completed later this year.
Toby Withall, office agency partner at Knight Frank Edinburgh, said: “Edinburgh has a clear supply-demand imbalance: there is no new-build space coming through until 2024, yet the level of demand is as strong as it has been for a long time.
"While some occupiers are downsizing on the back of the pandemic and incorporating more hybrid working, many are still very keen to have quality space in the city centre available to their staff.
“Refurbishments will help the situation, but an increasing number of occupiers want new build space that matches their ESG (environmental, social and governance) requirements. And, unlike many other major cities, much of Edinburgh’s Grade B office supply has been converted for other uses, even though that slowed during the pandemic.
“It is concerning that, as a growing capital city looking to attract businesses, we are close to a point where there is going to be no space to accommodate them. Haymarket Edinburgh demonstrates there is insatiable appetite for high-quality new space with access to the amenities you typically only find in a city centre.
“Edinburgh has become a victim of its own success as a great place to live and visit, which is in danger of stymieing the economic growth delivered by developing businesses in the city and attracting them from elsewhere. We need to address the lack of options in the city centre as soon as possible, opening up more opportunities for development.”
Knight Frank said its research has also revealed a lack of Grade B space available in Edinburgh to absorb excess demand, with 720,000 sq ft of Grade B office space converted through planning for change of use, largely to hotels and residential.
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