A LACK of speculative office development in Glasgow city centre helped to fuel a near-doubling of premium Grade A office lettings last year to more than 300,000 square feet, according to property agent JLL.
The company reported a 90 per cent increase during 2015 in the take-up of Grade A space – typically new build, high spec offices with features including raised access floors, suspended ceilings, air conditioning and amenities for cyclists and runners such as showers and changing facilities.
“I think it’s just been demand from occupiers, driven by their own lease expiries and break options,” said Alistair Reid, director for JLL in Glasgow. “Tenants are looking forward and seeing that there’s a potential restriction in supply of offices coming through the development pipeline. Occupiers are then thinking that if they do want to relocate, they need to come out to the market earlier and have conversations with landlords and developers earlier.”
New office builds helping to drive Grade A lettings include 1 West Regent Street – where only two and a half of the ten office floors remain – and 110 Queen Street, where six of the eight office floors have already been let. St Vincent Plaza – a new office building over 12 floors in Glasgow’s international financial services district – also saw the largest deal of 2015 with professional services firm KPMG taking 39,705 sq ft in November.
Other major transactions included Weir Group, the engineering business, taking 25,514 sq ft at 1 West Regent Street in January and Teleperformance, the call centre specialist, acquiring 27,522 sq ft at Cuprum – a new office development fronting Cadogan Square – in April.
A total of 314,256 sq ft of Grade A office space was let in 2015, up from 164,773 sq ft in 2014, JLL said. Across Glasgow city centre, a total of 570,905 sq ft of office space was let in 2015 – 15 per cent above the five-year average. Although down on the 2014 figure of more than 640,000 sq ft, Mr Reid said this was still a ‘good year’.
“Demand is patchy and is primarily focused on core city centre locations and on good quality new and refurbished stock,” Mr Reid said. “I think we need the market to improve to give developers confidence to undertake speculative development. There’s no speculative development underway in the city at the minute and as a result we won’t see any new build coming to the market until 2018 at the earliest.”
Entering 2016, JLL expects to see the refurbishment of Grade B office space emerge as a key trend due to a lack of active construction. A number of refurbishments are already underway, including 95 Bothwell Street, 9 George Square, 100 Queen Street and 100 West George Street, a former Royal Bank of Scotland bulding.
While the total space taken across Glasgow city centre was down slightly, the value of space increased with a headline city centre rent of £31 per sq ft. There were a total of 124 transactions in the city centre last year, compared with 129 in 2014.
JLL also released figures showing office lettings in Edinburgh during 2015 were the strongest for over 15 years and significantly above the five year average. Around 950,000 sq ft was transacted during the full year in the city, up 8.6 per cent from the previous year’s total of 875,000 sq ft.