The north-east commercial property market is feeling the heat of the oil and gas downturn but Angus MacCuish, managing director of Aberdeen consultancy FG Burnett, says it’s only getting back to normal
As a result in the shift in oil prices and hyperbole in relation to the potential demise of Aberdeen, I feel it only right to provide my take on what is really happening in the Granite City.
As a consequence of a high level of activity over the past few years in the energy sector, the property market experienced sustained high-level activity. This favoured developers, with occupiers having limited negotiating strength.
With the adjustment in the oil prices, an element of balance has manifested itself and now is the time for businesses to take the opportunity to review their space requirements.
The fact this has happened should not be regarded as a surprise – we have been here several times before. I can recall sub $10 oil in 1986 but we all weathered the storm.
Change is healthy because it drives innovation and undermines complacency. The business community has experienced previous adjustments, but at the same time cannot afford to ignore all that is going on.
We continue to see commitment to the commercial property scene and construction is continuing apace. In this constantly evolving world, businesses require to be adaptable and this in turn leads to changing demands for accommodation.
Experienced operators, developers and investors are continuing to commit to the city and projects such as the Capitol and the Silver Fin building are now under construction.
These two developments will have a hugely positive impact on the west end of Union Street and its environs, both from an atheistic perspective and the economic benefits from a substantial increase in footfall.
In addition, there is a lot of activity on the periphery of the city – be it Bridge of Don, Dyce, Kingswells, Portlethen or Westhill.
Much of the space under construction is either pre-let or sold, so concerns about over supply are in my view exaggerated.
Seldom a day passes that we do not read of the award of a substantial new contract, which bodes well for the future.
I am not for one minute suggesting that we are devoid of challenges, indeed far from it, but we need to be realistic and balanced in our assessment of the situation in which we find ourselves.
Experience tells us when the purse strings are tightened it drives innovative times, and can be a catalyst for collaboration and sharing.
Again with the benefit of our experience, we can state with confidence that historically a fall in oil prices has little or no effect on prices or rents in Aberdeen. I acknowledge that take-up rates slow down.
But the 1million sq ft of offices filled during 2014 was a record for the city and included the second largest letting in the UK. This demonstrates continued commitment to the energy capital of Europe.
The cyclical nature of the world’s oil and gas markets is nothing new for this area. The north-east’s position as a global energy hub, which has been built up over 50 years, has experienced several challenges throughout this time.
Following an exceptionally busy period, 2015/16 will, in my opinion, return to a more normal level of activity. It is unrealistic to consider the boom of 2012-2014 as the norm.
Deals continue to be made, with many still in the pipeline. There is definitely no big black cloud hanging over Aberdeen’s granite streets.