A lack of new Grade A office supply and limited opportunity for speculative development should incentivise those occupiers in Glasgow with upcoming lease events to commit to pre-lets in 2018 if they want to secure the best new buildings in the city.
We have significant lease events in 2021/2022 and large occupiers that are looking to move need to make a decision on a pre-let this year. If they don’t, they face missing out on the best sites while also lowering their ability to leverage a good deal. Key sites to watch include Bothwell Exchange at 177 Bothwell Street, 33 Cadogan Street and The New Exchange on Cadogan Street.
Grade A office supply continues to dwindle in Glasgow, and the shortage was accelerated in 2017 by demand from the public sector. The Scottish Courts and Tribunals Service (SCTS), OFGEM, The Department for Work and Pensions (DWP) and the Student Loans Company collectively committed to over 220,000 sq ft (20,438 sq m) of office space in the last 12 months.
The lack of inward investment into Glasgow in recent years, due to uncertainties around local politics, is beginning to turn and we are seeing the first signs that developers and investors are looking at the city again. This could spark new developments and create liquidity in the offices market as occupiers are given more options. However, until we see any new development, refurbished office space will continue to cater for demand and occupiers unable to wait for the delivery of new buildings can expect to pay £28 per sq ft for good quality refurbishments in 2018, only approximately £2 per sq ft below the current new grade A headlines.
Looking forward, we can hope investment through the Glasgow City Region City Deal will help to stimulate increased interest in the city centre. While this will be particularly pertinent for residential developments and mixed-use schemes incorporating residential, it could create a catalyst to unlock sites that have been undeveloped for a few cycles. Glasgow office landlords and occupiers have played a game of cat and mouse for far too long but 2018 could finally be the year to change this.
Read more: Spotlight: Scottish office market