Glut of space leaves prices low

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A glut of available office and industrial space in Aberdeen means there will be plenty of room for businesses to expand when the north-east economy eventually recovers, experts said yesterday.

Some of Ryden’s top team in the Granite City were discussing points raised about the local market in the firm’s 81st Scottish property review.

Ryden managing partner Bill Duguid, office market specialist Arron Finnie, industrial space expert Paul Richardson and investment-focused Ken Shaw all agreed Aberdeen’s commercial property scene was unlikely to see a return to boom times anytime soon.

But the city is not unlike Edinburgh and Glasgow in terms of supply, while the long-term prospects for investors looking for strong yields are good, they said.

And Mr Duguid said shiny new offices in and around Union Street – namely the Capitol, Silver Fin and Marischal Square – would also help to regenerate the city’s once-proud main thoroughfare.

“It is good for Aberdeen to have that stock of office space,” he said, adding: “I’m particularly encouraged by Marischal Square, which will help to regenerate that whole area. Getting new jobs and people in there has got to help.”

The Capitol and Silver Fin office buildings could have the same impact on the west end of Union Street, he said.

In its latest Scottish market review, Ryden said headline office rents in Aberdeen had remained at around £32 per square foot over the past six months, with incentives staying at about the 12 months rent-free level for every five years of commitment.

But the firm also warned that, despite positive take-up, there had been a marked slowdown in the number of inquiries due to a “cautious outlook”.

It added: “Fundamentally, the supply-and-demand dynamics in the Aberdeen office market remain set up to produce further downward rental pressure. It is expected that a reduction in rents across all quality of office accommodation, together with increased incentives, will be required to entice occupiers to relocate.

“This must be allied with regeneration initiatives to deal with the emerging overhang of surplus older offices in the city.”

Larger office deals in Aberdeen this year include the letting of more than 48,000sq ft of The Capitol to North Sea newcomer Chrysaor following its £2.3billion acquisition of assets from Shell UK.

Among other major transactions, law firm Stronachs signed up for nearly 14,000sq ft at 28 Albyn Place, and serviced office accommodation provider Orega took about 28,000sq ft of the Silver Fin.

Mr Shaw revealed considerable interest from potential buyers for Statoil’s UK North Sea headquarters at the Prime Four business park at Kingswells.

It has only recently gone on the market but Mr Shaw said half a dozen property investors had already been to see it.

The building’s “best-in-class” facilities and Statoil’s long-term commitment to the UK North Sea were the pull, he said, adding: “It is attracting a lot of interest from the UK and beyond.”