CBRE has reported signs of recovery in the Aberdeen property market during the final quarter of 2021, with a strong start to the new year expected.
The firm said it started 2022 with more than 150,000sq ft of office space under offer in and around the Granite City.
The Glasgow market is also improving, while Edinburgh has returned to pre-pandemic levels, the property giant added.
Office take-up in Aberdeen during Q4 2021 was the strongest for the year, with 91,000sq ft transacted across 14 deals between October and December, CBRE said.
This represents a 77.3% increase from the previous quarter.
There are signs that the city will soon enter its recovery phase as at present there is 300,000sq ft in live requirements for office space in the city.”
Amy Tyler, associate director for CBRE in Aberdeen.
But CBRE said Aberdeen’s office market was not recovering at the pace of Scotland’s other major cities.
This is because many Granite City businesses have held off making property decisions until after Covid measures relaxed and the impact of hybrid working assessed, it added.
A total of 118,000sq ft of office “re-gears” took place last year, showing many firms are choosing to extend leases on the space they currently occupy “in these uncertain times”, CBRE said.
The total office space take-up in and around Aberdeen across the whole of 2021 was 197,914sq ft, 47% below the five-year average and the lowest since CBRE records began.
Still many reasons to remain optimistic about the office market in Aberdeen.”
CBRE reported it alone has in excess of 150,000sq ft of transactions currently under offer that “have slipped into 2022”, so a strong start to this year’s take-up figure is expected.
Amy Tyler, associate director for CBRE in Aberdeen, said: “Whilst deal volumes and the space transacted are down across the year, there are still many reasons to remain optimistic about the office market in Aberdeen.
“There are signs that the city will soon enter its recovery phase as at present there is 300,000sq ft in live requirements for office space in the city.”
Granite City poised to benefit from energy transition
She added: “COP26 being hosted in Scotland also demonstrated the importance of renewable and clean energy going forward, and there is perhaps no city better placed to embrace this change, with Aberdeen already a leading figure in the development of sustainable energy.
“ETZ (Energy Transition Zone) Ltd’s commitment to a new 4,445sq ft office at Blenheim Gate is a statement of intent for this next critical phase of the north-east’s energy sector.”
CBRE said the largest Aberdeen deal of both the final quarter of last year and 2021 overall was at the former Chevron House at Hill of Rubislaw, where Ithaca Energy “made the positive commitment” to purchase its 96,357sq ft headquarters, having originally intended to downsize in the building.
Other notable deals in 2021 included MRS Training & Rescue taking 18,264sq ft at Aberdeen Innovation Park, Mental Health Aberdeen signing up for 11,827sq ft at Langstane House and HSE/the Met Office concluding on 11,237sq ft at Aberdeen International Business Park.
CBRE was involved in three out of these four transactions.
Supply continued to rise in the Aberdeen market as the year drew to a close, CBRE said.
It added: “There is currently 2.793m sq ft of available office space within Aberdeen, representing a total vacancy rate of 27.93%.
“Crucially however, Grade A space remains at a premium as new stock continues to prove popular with occupiers.
“There is currently only 491,527sq ft of available Grade A space within the Granite City, representing a vacancy rate of 4.92%.”
Edinburgh and Glasgow markets also strong
Office take-up in Edinburgh totalled 294,441sq ft in the final quarter of 2021 – up 101.8% from the previous quarter and 77.7% against the Q4 five-year average.
It brought Edinburgh’s total take-up for the year to 688,238sq ft.
While this is below the five and 10-year average, it is a return to the pre-pandemic level of 2019.
CBRE said take-up for the Glasgow office market totalled 115,825sq ft in the final quarter of the year, down from the previous quarter but up 33.5% against the same period in 2020 – “a recovery much stronger than many of the other UK cities”.
A total of 603,000sq ft of Glasgow office space was transacted across the year, which CBRE said highlighted growing confidence in the market in Scotland’s largest city.
No-one now thinks the office is dead.”
Stewart Taylor, CBRE.
Stewart Taylor, head of CBRE’s Scottish advisory and transactions business, said: “If we had known 12 months ago that 2021 would be dominated by more restrictions and stop-start government guidance, we would have taken these results and headed for the hills.
“No-one now thinks the office is dead. These are a strong set of statistics, and as we enter the new normal we will continue to see a flight to quality and record rents being set in buildings owned by forward-thinking investors.”