EDINBURGH’S office market is in a strong position to weather the UK’s first recession in 11 years, according to analysis from Knight Frank.
The independent commercial property consultancy’s projections found that the vacancy rate for all grades of office space across the city is unlikely to exceed 8.5%, less than half the rate registered in the aftermath of the financial crisis just over a decade ago.
In 2008, the vacancy rate for Edinburgh offices stood at 12.5%. Another 638,000 sq. ft. of new space was added to the pipeline over the next two years which, combined with businesses relinquishing accommodation, led to a vacancy rate of 17.5% in 2010.
By comparison, the current vacancy rate sits at 6.3% and just 183,000 sq. ft. is scheduled for completion over the next 24 months, some of which will likely be subject to delays. As a result, Knight Frank said the vacancy rate should remain below 8.5% – notwithstanding a sudden deluge of occupiers forfeiting leased space.
Edinburgh’s office market has been resilient in 2020, despite the challenges of Covid-19. Further analysis from Knight Frank found that occupiers are still looking for around 500,000 sq. ft. of space, with around 417,000 sq. ft. of Grade A accommodation available.
The first half of the year saw 136,000 sq. ft. of space transacted – heavily weighted to the first quarter, prior to Covid-19’s impact – with re-gears accounting for the majority of activity. In July, one of the biggest deals of recent years was announced with Ballie Gifford agreeing to pre-let 280,000 sq. ft. at the Haymarket Edinburgh development for its new headquarters.
Toby Withall, office agency partner at Knight Frank Edinburgh, said: “Despite uncertainties in the wider economy, with the UK officially entering recession for the first time in more than a decade, there are reasons to be optimistic about Edinburgh’s office market.
“The volume of demand has remained robust, while the supply of new space remains relatively scarce and the development pipeline has been stunted by the effects of Covid-19.
“The Baillie Gifford pre-let at Haymarket is a major vote of confidence in Edinburgh and there are signs that the wider market is beginning to thaw as well, with deals approaching conclusion and new viewings taking place within government guidelines.
“Many of the live requirements that were issued before lockdown were paused, rather than abandoned altogether, and there are tentative signs that many of them will begin to progress again. We have even seen some occupiers rekindle deals that were shelved during the height of the pandemic, as they begin to take a more positive stance.
“Of course, the situation is continually evolving but, as businesses begin to look at returning to the workplace, there are reasons to feel positive. It is, nevertheless, more important than ever that landlords and occupiers collaborate and regularly communicate as they adjust to new working patterns and operating models, with flexibility particularly important in helping both parties manage the challenges that lie ahead.”