There are definite reasons for optimism in Aberdeen’s commercial property markets in the year ahead.
Demand for office and industrial space continues to improve, helped by a sustained higher price for oil and gas and improving confidence in the outlook for the energy sector generally.
The region is also benefiting from the start of a transition to renewables.
In the city centre, new Grace A office developments from the last development cycle – Marischal Square, The Capitol and Silver Fin – are essentially full, so there is a shortage of Grade A space.
The office space that is available is typically of poorer quality and in need of investment.
Empty building rates change having an impact in Aberdeen office market
A change of rules that came into effect on April 1 2023 has had an impact and generated activity in Aberdeen.
The reduction in empty building rates relief for listed properties requires landlords with ageing assets to consider their future use.
The question facing landlords is what will it take to modernise these older buildings to meet future demand for modern office space, and what sort of return might be expected?
Notable current examples we are part of include 3-5 Albyn Place, acquired by Surplus Property Solutions and undergoing a significant refurbishment and upgrade.
Another is Caledonia House on Union Street, acquired by Standard Real Estate.
Both these city centre office buildings will be redesigned and refurbished to offer high-spec, highly desirable, Grace A space in 2024.
Generally speaking, it has been our experience that landlords who have had the resources and courage to invest in upgrading older stock – assuming the product is right – have done well in attracting new occupiers.
Given current market conditions, we will see more of this activity in 2024.
In the year ahead we will also see a number of older, former office buildings repurposed through change of use.
New student accommodation schemes will come to market in 2024 through the conversion of older office stock.
Investment in city centre projects of this nature combined with upgrades for older office stock will result in a further increase in city centre footfall – all good news for the Granite City.
Similar tale for industrial properties in Aberdeen, with good quality premises in short supply
It is a similar picture in the industrial market. While there is still significant empty space, there is a distinct lack of “prime” facilities.
As with the office market, available older stock is typically of poorer quality and in need of investment and improvement. Industrial space that is not considered economically viable for the future will likely be demolished in order to avoid the burden of empty building rates.
Steve Judge is the founder and chairman of office fit-out specialist Space Solutions.
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