Aberdeen office market sees 115% increase in participation

Property adviser CBRE has revealed that Aberdeen has seen office adoption rise by 115%, its highest level since the first quarter of 2012.

He said the first quarter of 2022 saw take-up hit 195,905 square feet, a 115% increase from the previous quarter and the highest since 2012.

CBRE advised 169,460 square feet of traded space, which equates to 86% of all deals in the quarter.

The largest transaction of the quarter in Aberdeen and Scotland was energy giant Shell, which committed 100,312 square feet to the Silver Fin Building, resulting in full occupancy of the building from Category A downtown offices.

Other significant deals in the quarter include the recently rebranded North Sea Transition Authority (formerly Oil & Gas Authority) acquiring 18,000 square feet in Marischal Square, PBS and RelyOn Nutec taking 17,911 square feet and 7,933 square feet respectively in Westhill , DNV leasing 10,948 square feet in the Aberdeen International Business Park, Dyce and Waldorf Production buying 6,803 square feet at 70 Queens Road.

Last quarter office supply was reduced by 5% and currently stands at 2.67m², with only 428,000 square feet of available Class A space.

While office take-up in Edinburgh totaled 118,926 square feet in Q1 2022, it was up 33% from Q1 2021 and only slightly below pre-pandemic levels in Q1 2020.

A similar trend continues in 2022, with occupiers remaining focused on quality space, as evidenced by the number of Class A office transactions.

Class A take-up reached 67,161 square feet, representing 56% of the first quarter total. Notable transactions included two further rentals in The Haymarket development, where Shoosmiths and Dentons took up space totaling 31,345 square feet.

There was an influx of deals in the first quarter, with 31 deals for new commercial space in the city, up 15% from the first quarter of last year.

The highest level of activity was recorded in the less than 5,000 square foot market with 29 transactions. It was also a strong quarter for the 10,000+ square foot portion of the market with four transactions totaling 57,501 square feet.

These included Haymarket’s deals as well as TrustPilot, the Danish consumer review company, letting 10,515 square feet at 10 George Street and Roslin Cells agreeing to let around 15,000 square feet at Edinburgh Technopole.

He noted that there is continued pressure on prime rents in Edinburgh as the supply of Grade A space continues to shrink in the city centre.

Prime rents now sit at £38.50 per square foot, but with supply tight and the development pipeline limited in the near future, it should soon reach £40 per square foot.

Supply increased again in the last quarter, with 1.97 m² of office space now available in the city. With the longer-term supply average standing at 1.99m², Edinburgh still finds itself below this figure despite the impact of the pandemic.

He said intake for the Glasgow office market totaled 95,496 square feet in the first quarter of the year, a 28% increase from the first quarter of 2021.

A total of 38 rentals took place during the quarter, which already represents 30% of the total number of transactions throughout 2021.

Glasgow’s rolling 12-month average has increased, with 623,888 square feet processed in the past year.

The largest of the first quarter deals was Burness Paull’s 14,814 square foot lease at the recently completed 2 Atlantic Square, on which BDO also took 8,078 square feet, with CBRE involved in both deals.

An additional 10,200 square feet was negotiated at Tay House with Fairhurst Civil Engineers taking space in the building on a ten-year lease.

180 West George Street has also been involved in a few deals – with Frazer Nash and LMR Partners responsible for around 13,454 square feet of exchange over two floors.

The supply of office space continues to increase gradually in the city, with availability now standing at 2,684 m² – the highest since 2015.

However, Class A office supply remains at a “critical shortage” with only 168,000 square feet available, reflecting a vacancy rate of 0.74%.

He said that with no new developments in the pipeline, the current prime rent of £35.25 per square foot is expected to continue to rise.

He notes that this is partly linked to inflation in construction costs and users’ recourse to pre-letting.

Andy Cunningham, Head of CBRE’s Scottish Advisory and Transactions business, commented: “We have seen an encouraging start to the year in all three cities with the same recurring themes that were prevalent in 2021 – a flight to quality space and strong environmental credentials. It is pleasing to see that Aberdeen is having a particularly strong first quarter, thanks in large part to the team’s recent letting of Shell’s new headquarters in the Silver Fin Building.

“Going forward, we believe there will be fewer lease renewals than in the past, as the desire for a more modern building will be stronger, and with so little supply, large occupiers will have to s ‘hire sooner than ever to get the best space which means we’re likely to see an increase in pre-rental activity.

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Jose C. Birney