Take-up in Edinburgh city centre reached 155,000 sq ft during the first quarter of 2018, although 44,000 sq ft of this was FRP Advisors' acquisition of Buchan House for alternative use. The largest city centre deal was engineering consultant, Sweco signing for 14,000 sq ft at Quay 2, however, Instant Offices signed for 24,000 sq ft at Cornerstone, South Gyle, marking the largest serviced office deal in Scotland's out of town market on record.
With only 140,000 sq ft of Grade A space remaining in the city centre, competition for large floorplate stock is becoming even more competitive and tenants in search of larger floorplates are being forced to the fringes. This is only enough space for around six months of Grade A take-up at average annual levels.
2 Semple Street reaches practical completion at end Q2 2018, whilst The Mint (60,000 sq ft) and Capital Square (122,000 sq ft) are scheduled for completion in Q1 2019 and Q2 2020 respectively, which should ease the shortfall.
Glasgow's city centre lettings soared to 249,483 sq ft during the first quarter of 2018, driven by the Government Property Unit's 187,000 sq ft pre-let at Atlantic Square.
However, besides this deal and Orega's serviced office deal, there were no deals over 7,000 sq ft during the first quarter.
As announced at MIPIM 2018, FORE Partnership will be bringing forward Glasgow's first speculative office development in the city centre since 2015 and we expect a further 97,000 sq ft of speculative office space at BAM's Atlantic Square to be announced later this year. A shortage of Grade A space will continue to boost top rents which we expect could reach £32.50 by end 2018. Cadworks will provide 94,000 sq ft of space and will be Scotland's first office allowing cyclists to ride directly into their office upon its completion in 2020.
Over the next five years, Aberdeen, Edinburgh and Glasgow are forecast to see a combined 3.6% office based employment growth, in line with the national average. This indicates a net additional 13,000 office based jobs, or a need for a net additional 1.3 million sq ft of office space across the three cities.
Investment
Scottish office investment transactions continued the strong momentum from last year, with £342 million of transactions recorded in the first quarter of 2018, 96% above the historic first quarter average (Graph 3).