The Edinburgh city centre office rental market enjoyed an “extremely strong” fourth quarter of 2022, with take-up amounting to 256,648 square feet in Q4, an increase of 50% on the previous quarter.
According to real estate advisor Avison Young’s latest quarterly “Big Nine” office market update, total Q4 take up in Edinburgh was 38% above than the 10-year average.
Total take up for the year in Edinburgh was 641,330sq ft, marginally down on 2021 and 14% down on the 10-year average.
However, the number of Edinburgh deals in 2022 was up 14% on the 10-year average, reflecting a greater prevalence of smaller lettings.
Q4’s strong volumes in Edinburgh were driven by the city centre market, which performed 84% better than the 10-year average.
Edinburgh city centre take-up was led by the biggest signing of 2022 across all Big Nine cities — US asset management giant Blackrock’s 140,000 sq ft space at Dundas House in Brandon Street, Canonmills.
Other significant deals of the quarter in Edinburgh included Rockstar’s expansion to 11,577 sq ft at Holyrood Park House, and Anderson Anderson & Brown’s (AAB Group) 9,529 sq ft move to 81 George Street.
Prime headline rents in Edinburgh have increased to £40 per square foot.
Availability in Edinburgh city centre has increased to 9.3% — up 2% from the previous quarter.
Meanwhile, office take-up in Glasgow totalled 151,329 sq ft in Q4, slightly up on the previous quarter but still subdued compared to long term trends.
In total, 2022 was Glasgow’s quietest year for office take-up over the last decade at 581,934 sq ft — about 46% below average.
Peter Fraser, director at Avison Young, Edinburgh, said: “There are many similarities between Edinburgh and Glasgow office relocations.
“New lettings are being driven by ‘best in class’ office space to satisfy the increasing requirements occupiers are placing on sustainability and ESG.
“The location and quality of the office also plays an integral part in attracting talent and return to office strategies.
“While Edinburgh saw a reduction in overall take-up, with 641,330sq ft recorded during 2022, the number of deals is actually 14 percent up on the long-term average, demonstrating greater deal volumes involving smaller, better quality office space, with headline rents gradually increasing over the year.
“Edinburgh also recorded almost 500,000sq ft of lease extensions, albeit several of the larger deals involved short-term extensions to see occupiers through until their new premises were ready.
“Another observation is that prior to the pandemic, 65 percent of all take-up was recorded in the city centre, while post-pandemic that figure has increased to 84 percent.
“There was a suggestion during lockdown that occupiers might favour smaller satellite offices in out-of-town locations, but that has not been a trend seen in Edinburgh.
“Looking ahead to 2023, there is a very limited supply of prime and Grade A office stock, plus a restrained pipeline of new product in the city centre.
“Consequently, we are seeing a greater number of retrofit projects across central Edinburgh as landlords aim to achieve the same ESG benchmarks in existing buildings which occupiers are seeing delivered in new builds.
“We are also seeing an increase in enquiries for out-of-town accommodation following a couple of subdued years.”