CBRE’s team in Aberdeen are predicting bigger lettings in the city’s office market during the second half of this year after a “subdued” first six months.
They have forecast increased demand for “best-in-class” space in the Granite City.
This is despite an availability squeeze for the best accommodation.
Smaller deals have dominated the Aberdeen office market during 2023
Dominic Millar, who joined CBRE’s Aberdeen office as an apprentice surveyor last year, said: “The majority of transactions this year have appeared in the sub 5,000sq ft market.
“While there is still activity and demand, occupiers are taking less space.
“It is less but we continue to witness an intensified flight to quality in Aberdeen, especially to those buildings with good energy credentials – such as high BREEAM (Building Research Establishment environmental assessment methodology scheme) and EPC (energy performance certificate) ratings.
“This is reflected in the low-Grade A vacancy rate of 2.4%.”
Mr Millar said some occupiers were also trying to minimise their spending on fit-out costs by acquiring “the best quality ‘plug and play’ suites in Aberdeen”.
These let-ready suites can offer a better viewing experience and boost the “convenience factor” for potential tenants making up their minds about an office move, he explained.
West end enjoying a ‘renaissance’
He added: “An example of this is energy services company Genesis’ relocation to 26 Albyn Place in the west end of the city. The 14,100sq ft office was extensively refurbished by landlord Tilestamp, achieving an EPC A rating in the process.
“Albyn Place in particular has experienced a renaissance in 2023, with Genesis joining Rosen and Mods Management who have also recently relocated to the street, all to traditional office buildings which have benefitted from significant renovation.”
This shows there is occupier demand for new office space in the city if landlords are prepared to invest in high quality refurbishment of prime west end buildings, Mr Millar said.
CBRE’s Aberdeen team completed their own relocation earlier this year, moving into Marischal Square.
Figures released by the firm a few weeks ago showed office take-up in the Granite City during the second quarter of this year totalled 54,584sq ft, a slight increase on Q1’s figure of 54,009sq ft figure and taking the total for the first half of 2023 to 108,593sq ft.
By contrast, office deals struck during the first six months of 2022 totalled 256,426sq ft.
Investment in Scottish commercial property down by 66% year-on-year
Meanwhile, the latest Scotland Snapshot report from Colliers has revealed a year-on-year slump in investments across all types of commercial property north of the border.
The total for the first half of this year was £570 million, 66% down on H1 2022. The second quarter total was £320 million, up from £250 million in Q1 but 35% below the five-year quarterly average of £490 million. With 30 deals completed in Q2 2023, the average lot size was £10.7 million, up from £8.6m in Q1 and only slightly below the five-year average of £11 million.
Oliver Kolodseike, director in the research and economics team at Colliers, said: “As with all markets across the UK, Scotland is no stranger to the limiting impact that high interest rates, cost of living and the cost of construction is having on the market.
“While there’s no silver bullet that can help, it would seem we are reaching peak in interest rates, and as such some pressures should ease as we head towards next year.”
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