CBRE research reveals Glasgow office market performance in Q2 2022
Take-up for the Glasgow office market totaled 135,155 square feet in the second quarter of the year, up 9.6% from the second quarter of 2021, showing that the market continues to recover of the impact of the pandemic.
Total year-to-date occupancy is 230,651 square feet, up 16.5% from the same period last year. Additionally, Glasgow’s 12-month rolling average has increased, with 635,685 square feet processed in the past year, representing a 61.88% increase over the previous 12 months.
Glasgow has witnessed two deals in the past three months that have passed the 20,000sqft marker: Ovo Energy taking 33,905sqft in the recently completed Cadworks and serviced office providers WIZU letting 24,350sqft across three floors at 2 West Regent Street. Additionally, there was more activity at ONYX on Bothwell Street with drinks maker Diageo agreeing to lease 12,438 square feet over two floors.
Office supply continues to grow in the city, but best-in-class Class A space remains paramount. Of the 2,895m² of office space currently available on the Glasgow market, only 134,194m² are considered Grade A, representing just 0.59% of Glasgow’s entire office stock.
As occupants continue to seek buildings with strong ESG credentials, much future demand is expected to be for newer Class A spaces. This will result in prime office rents in the city exceeding the current rate of £35.25 per square foot by the end of the year. This positive rental growth will be amplified by the lack of new developments coming off the ground, in addition to the continued rise in construction costs and inflation. However, The Grid, CEG’s historic 277,426 square foot development in Glasgow city centre, is now scheduled for start-up on site as early as August this year and will provide the next phase of the newly built Grade A space. in the city.
This pressure on new available stock will inevitably force many occupiers to turn to second-hand space, and we are already seeing many owners investing and renovating their assets in order to appease the demand for modern and sustainable commercial space. Currently, 50 Bothwell Street and 200 Broomielaw are undergoing extensive renovation projects which are expected to be completed before the end of the year. As a result, Class B rents are expected to increase at a faster rate than expected at the start of the year.
Positive rental growth in both the Class A and Class B office markets will be an attractive proposition for investors, and it also underlines how well Glasgow has recovered from the pandemic as it continues to be a profitable market . Shares worth £24.1million have been traded so far this year, with further deals ongoing and a significant amount of capital expected to be traded by the end of the year. Prime net initial yields on Class A offices remain attractive at 5.00%.
Martin Speirs, Associate Director of CBRE in Glasgow, said: “We are entering an interesting period in the Glasgow office market, with Class A supply continuing to decline and demand for prime space remaining. Occupants now understand more than ever the importance of not only having high-quality office space, but also a space that provides their people and their business with the ESG focus that is demanded in the workplace. board level. The war for talent is becoming evident and it is only with attractive and exciting office spaces that occupants will succeed in attracting and retaining their best employees, but also, above all, in encouraging them to return to the workplace.