Take-up of office space in Glasgow surpassed the 10-year annual average of 500,000 sq ft in the first three quarters of 2016, a 26 per cent uplift on the same first three quarters of 2015, and by the end of the year over 800,000 sq ft of deals had been completed in the city.
Keys deals included a 154,814 sq ft pre-let to Morgan Stanley at Bothwell Plaza, ACCA taking the remaining 55,744 sq ft of accommodation at 110 Queen Street, AXA moving to 49,424 sq ft in Cuprum and Edrington Group agreeing a new lease on 29,890 sq ft at 100 Queen Street.
Occupier demand continues as we enter 2017 with the likes of Mott Macdonald, Scottish Courts, Mazars, Wood Group and HMRC actively looking for almost 400,000 sq ft in the city between them. Consequently supply is diminishing and, as we have roughly only 400,000 sq ft of Grade A office accommodation available in Glasgow (of which only 130,899 sq ft is classed as ‘new’), the big question is, where will occupiers looking to move go?
Adding to the supply/demand imbalance in the city is the lack of speculative office development, with no new developments likely until 2020 largely due to uncertain economic and political conditions. This has meant that despite strong demand top Grade A office rents in Glasgow remained flat throughout 2016, at £30 per sq ft, and incentives continue to move out. It is also having wider implications on Glasgow’s ability to attract inward investment, which as a city we are currently struggling to do.
For the foreseeable future, refurbished offices will have to cater for demand and in 2017 we could see 300,000 sq ft of offices suitable for refurbishment come onto the market. To stand out, landlords should consider best in class refurbishments that are relevant to the needs of the occupier and cater for the demand for ‘new’ space. Done well, refurbished accommodation could benefit from rental growth throughout the year.
Our What Workers Want research revealed 66 per cent of workers in Glasgow value the interior layout and design of the workplace as important, the highest number recorded in the UK. However only 19 per cent of employees feel that the layout and design of their current workplace increased their productivity. Addressing this deficit is a good place for Glasgow’s landlords to start.
Read more: Savills Scottish Offices report