Scotland’s shortage of Grade A office space is causing occupiers to prioritise refurbishments and refits instead of relocations.
That's according to new figures from property services firm JLL, which showed that just over 280,000 sq ft was transacted in Edinburgh in the first six months of 2023 – down on the first-half 10-year average.
JLL attributes this to a lack in supply of 'best-in-class' options.
As a result, an increasing number of landlords are looking to attract tenants by refurbishing existing space to improve sustainability features and create more amenities.
Despite this, baseline demand has remained resilient, with some occupiers in Edinburgh opting to upsize during the first six months of 2023. Notable deals in this regard include a 28,000 sq ft leasing at 2 Freer Street to Analog Devices, as well as Lumicron taking 12,800 sq ft at 4/5 Lochside Avenue.
In Glasgow, while overall take up is down compared to the first-half 10-year average (277,411 sq ft), the number of transactions remains consistent with previous years, indicating that occupiers are still making occupational decisions albeit on a reduced size basis.
With no new build developments completing in the city until 2025 at the earliest, upgrade refurbishments are filling the gap, with new figures showing that 70% of all deals completed in the city over the past 12 months included elements of fit out as occupiers seek straightforward, flexible solutions.
Just as in Edinburgh, however, demand in Glasgow remains buoyant, with a number of deals under offer expected to bolster take up for the rest of the year and push headline rents higher, as occupiers chase higher returns amid a diminishing amount of high-quality stock.
Alex Mackay, associate director at JLL in Glasgow, said: “The lack of available Grade A space in Glasgow is well reported, and we are starting to see this reflected on the market as occupiers chase a diminishing supply of the best space.
“In response, we’re likely to see an increased focus among landlords on environmental credentials and high-quality building amenities, with the gap in quality between the best-in-class assets and the wider market reinforced by latest headline rents set for the city.”
Hannah Done, associate director at JLL in Edinburgh, said: “Deal numbers remain slightly below the first half average in Edinburgh – yet with an increasing number of high-profile firms across the UK such as Meta and Accenture mandating that employees return to the office, we expect transaction levels will maintain an upward trajectory in the months ahead.
“With some firms signalling their intentions to upsize in H1, it’s key that landlords continue to meet tenant demand with a supply of top-quality office space."
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