Public-spending cuts to affect Edinburgh office market – Colliers International

Colliers International says future public-spending cuts are likely to have a major impact on office take-up in the central city area of the Edinburgh office market. The firm notes there was a marked improvement in take-up during 2010, with the City Core office market seeing a 24% rise in transaction levels year-on-year. The public sector was the largest sector in terms of uptake of office space, but it expects this figure to fall markedly over the next two years.

Hopes that the private sector might take up the slack were boosted by growth in the Scottish manufacturing and service sectors in January, Colliers International notes. However, the fall in overall private-sector employment levels that month, for the third month in a row, cast doubt on that hypothesis, it says.

Offices take-up in the City Core of Edinburgh 2010 was 446,000 sq ft, the firm notes. Banking and financial services take-up nearly doubled year-on-year, but was still the second lowest annual figure since 2002 at 54,558 sq ft and well below the 10-year annual average of 114,247 sq ft. Compared with the longer-term averages, occupier demand in Edinburgh still remains below trend, it points out.

The first two months of 2011 have been positive, Colliers International says, with Virgin Money taking 30,000 sq ft in St Andrews Square and Regus extending its lease over 20,700 sq ft at Conference House, Morrison Street in the city centre. The firm notes that office space in the city remains in oversupply, particularly for Grade B space, which is down 4% year-on-year. “Over 300,000 sq ft remains available and we do not expect to see any uplift in rents, which currently stand at £27.50 per sq ft,” it adds.