Glasgow office take-up went above the 10-year annual average of 500,000 sq ft within the first three quarters of last year, according to Savills.
Take-up totalled 523,000 sq ft, a 26% uplift on the same first three quarters of 2015, and a total of 800,000 sq ft of deals completed by the year end.
The firm says the lack of supply driven by robust figures will lead to more refurbishment in the city.
Keys deals include a 154,814 sq ft prelet 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.
Available grade A stock stands at 400,000 sq ft, says Savills, of which only 130,899 sq ft is classed as new.
With ongoing occupier demand from the likes of Mott MacDonald, Scottish Courts, Mazars, Wood Group and HMRC, who are actively looking for almost 400,000 sq ft in the city between them, an imbalance in supply and demand is expected.
New developments are now not likely until 2020 due to uncertain economic and political conditions and a possible influx of buildings that are suitable for refurbishment coming back onto the market in the next three years.
Savills suggests up to 300,000 sq ft of offices suitable for refurbishment will come onto the market in 2017 alone.
As a result of reduced new development, top grade-A office rents in Glasgow remained flat throughout 2016, according to the firm, at £30 per sq ft.
David Cobban, director in the business space team at Savills Scotland, said: “A possible wave of office accommodation coming back onto the market is incentivising landlords to complete deals on available office stock ahead of this, which despite the current lack of quality supply, is resulting in incentives moving out and headline rents remaining flat. A lack of new development is also having wider implications on Glasgow’s ability to attract inward investment, which as a city we are currently struggling to do.”
Savills says Glasgow’s office market remains strong despite wider political and economical factors, with the latest figures from Oxford Economics indicating a 3.1% growth prediction in office-based employment in the city over the next five years, compared to -0.4% in the previous five-year cycle.
Cobban adds: “Landlords with office space likely to come back onto the market should consider best-in-class refurbishments that are relevant to the needs of the occupier and cater for the demand for new space. Our What workers want research revealed 66% 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% of employees feel that the layout and design of their current workplace increased their productivity. Addressing this downfall is a good place for Glasgow’s landlords to start.”
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