The price of Brent Crude oil recently reached $50 per barrel, up 76 per cent from a low of $28.43 in January 2016. Sentiment on the streets of Aberdeen is that while there is still some pain to come for companies losing out on contract awards, those who are winning them, plus those sitting more comfortably (many not being related to oil and gas), have begun to refocus on their property requirements.

This is evidenced in the increase in demand for commercial property, with 850,000 sq ft (79,00 sq m) of requirements in the market logged to May this year compared with 250,000 sq ft (23,225 sq m) of requirements by end of May 2015 – an increase of 240 per cent.  

The increase in businesses looking for industrial space in particular has been notable. These occupiers were previously unable to compete with the strong demand for office space on Class 4, 5 and 6 development land (land granted for office, general industrial and/or storage use), and have recognised the current opportunity to break into the market with most developers now willing to consider all options.

Elsewhere, other existing office occupiers in tired space or poor locations, who until recently were limited by heightened competition and a shortage of space, are taking advantage of the greater availability of accommodation and the opportunity to improve quality. A recent example of this trading up is the letting to PWC of 10,000 sq ft (929 sq m) in The Capitol, a newly completed office building by Knight Property Group / M&G. On business parks and industrial estates in and around Aberdeen Savills currently has an additional 252,650 sq ft (23,650 sq m) under offer to companies looking to upgrade to better quality accommodation.

What we are seeing is a re-positioning of Aberdeen’s commercial property market to align with activity akin to other major UK cities. The headlines state that around two million sq ft (185,800 sq m) of office space is now available in the city. While there are certainly more options for occupiers, a large proportion of this available accommodation is in need of renovation, or better still, change of use.

The market in Aberdeen has been so hot for so long – at one point in 2013 there was only 10,000 sq ft (929 sq m) of Grade A office space available in the face of over one million sq ft (92,900 sq m) of active requirements – today we are operating in a significantly different but more normal market place. Let's use this time wisely to rationalise Aberdeen's commercial property stock by quality and focus on improving the city's infrastructure – signs of improvement in both are already visible.

So is it all bad? The headline job-loss unemployment stats are breathtaking but also misleading due to the high proportion of oil and gas workers based elsewhere in the UK. 

Office rents don’t look that bad, and with no additional new development set to complete in Aberdeen before 2017, it’s likely that headline rents will stabilise at around £30 per sq ft despite the greater availability of space.

The number of property enquiries appears to be recovering and perhaps we shouldn’t be surprised. Aberdeen has a big academic community with two universities, a teaching hospital, two further education colleges and two research institutes. In fact, Aberdeen has more life science graduates per head of population than any other UK city apart from Cambridge.

Furthermore, it services a prosperous hinterland which has significant whisky production, agricultural production and food processing and, in Peterhead 40 miles north, has the largest white fish port in Europe. The city is also a tourism gateway.

Aberdeen has successfully met challenging market conditions before and looks like it is doing so again.

Further information

Read Savills Spotlight: Scottish Office Market