A shortage of new office development in Edinburgh has closed the gap between refurbished office rents and new space to its lowest level on record, according to Savills.
Refurbished office rents are expected to hit £32.50 per sq ft in Q3 2017, closing the gap between refurbished and new build rents to only £1 per sq ft.
The advisory firm said new grade-A supply in Edinburgh stands at only 345,000 sq ft – enough to meet only one year’s worth of demand.
Of only two speculative office developments under construction, M&G’s Quartermile 3 has just 7,000 sq ft of the 73,000 sq ft building available following a letting to State Street, while GSS Development’s 40,000 2 Semple Street will be available for occupation from Q2 2018.
The Mints, where construction is due to begin shortly, is understood to be prelet.
Savills forecasts Edinburgh’s office take-up across all grades will reach 750,000 sq ft in 2017 as occupiers turn to refurbished options.
Around 580,000 sq ft of lease expiries will occur between 2019 and 2021.
Keith Dobson, director in the Scottish business space team at Savills, said: “Edinburgh’s office supply and demand imbalance is nothing new, however the pressure on both has never been greater.
“Occupiers with upcoming lease events and those looking to expand in the city are facing a severe lack of options. Rents on refurbished offices are rising as a result and we are anticipating the market will see a number of prelets on the existing speculative developments as occupiers compete for the best space.”
The rising cost of refurbished office space will push rents on new-build offices in the city further, and are likely to reach £34 per sq ft by the end of 2017, placing Edinburgh alongside Manchester as one of the most expensive office markets outside of London and the South East.
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