The Scottish office market has demonstrated its resilience in the final quarter of 2023, despite the challenges posed by the pandemic and the economic uncertainty. According to the latest research by CBRE, the leading real estate advisor, the key office markets in Edinburgh and Glasgow have seen positive signs of recovery, with strong demand for flexible and sustainable office space.
Edinburgh office market remains optimistic
The Edinburgh office market has seen a slight dip in take-up in the final quarter of 2023, with 157,807 sq ft of office space taken up, down 3% from the previous quarter. However, the total take-up for the year was 618,148 sq ft, which is broadly in line with the five-year average and fuelled by demand from the financial and professional sectors.
Angela Lowe, Senior Director at CBRE, said: “While the actual square footage was down slightly on Q3, there were a significant number of deals – 51 – in the final three months of the year. This brings the end-of-year total to 165 new transactions, up 13% on the previous year, and indicates the growing confidence in the Edinburgh office market. The fact that many of these were high-value lettings to global companies shows just how robust the market is now, despite the economic turbulence the UK has experienced in recent years.”
Some of the major lettings in Q4 included Atkins, Buro Happold, and TLT LLP at New Clarendon at 114-116 George Street, accounting for a total of 15,723 sq ft. At Capital Square in Edinburgh’s Exchange District, LGT Wealth Management secured the remaining suite of 9,400 sq ft. Rents at the sought-after development have been consistently increasing over the past 15 months, aligning with the overall pattern of rental growth observed across the city.
Lowe added: “Despite a slightly subdued end to the year, a renewed sense of optimism is returning to the Edinburgh office market. We expect 2024 to be a strong year for the capital as more businesses encourage their employees back to the office full-time and the economy continues to stabilise. Demand for best-in-class offices with strong sustainability credentials also continues to grow from occupiers, particularly large corporates.”
Glasgow office market sees steady improvement
The Glasgow office market has also seen a steady improvement in the final quarter of 2023, with 95,809 sq ft of office space taken up, up almost 30% from the first quarter of the year. This brought the total take-up for the first half of the year in Glasgow to 169,874 sq ft, which is down on the same period in 2022, but shows that the number of deals remains steady.
The largest deal of the quarter was a 12,008 sq ft letting to We Are Luxe Ltd at St Vincent Plaza, followed by a 10,424 sq ft letting to Iomart at 6 Atlantic Quay and a 7,294 sq ft letting to Wizu Workspace at 2 West Regent Street. The sub 5,000 sq ft lettings market dominated once again, with 49,302 sq ft acquired across 34 deals.
Overall supply is down on last quarter, with 2.58m sq ft of office space now available within the city. However, best-in-class Grade A space remains at a premium, with only 75,943 sq ft of it considered prime, new build Grade A, representing just 2.94% of all Glasgow office supply. Prime rents remained steady at £36 per sq ft in the first half of the year.
Lowe commented: “With occupiers continuing to seek buildings with strong ESG credentials and amenities that attract staff back to the workplace, it is expected that much of the future demand will be for newer Grade A space. The Glasgow office market is showing signs of recovery and we anticipate that the second half of the year will see more activity as confidence returns and the vaccination programme progresses.”