A trio of firms in the finance sector are set to secure more than 150,000 sq ft of space in Edinburgh city centre.
However, the moves by State Street Investors, Aberdeen Asset Management and EY, all represent modest downsizings in terms of their occupation.
Uncertainty caused by Brexit, coupled with the prospect of another Scottish independence referendum and a lack of suitable space has hit take-up by financial services occupiers in recent years. Several developments in the pipeline are still at pre-construction stage, awaiting prelets.
State Street is negotiating with Standard Life on 65,000 sq ft at 1-7 Exchange Crescent for its new headquarters in the Scottish capital.
Rents at Exchange Crescent are around £22 per sq ft and State Street is looking to sign a 15-year lease.
The company will shift its 850 employees from its home at Corpus Sireo’s 525 Ferry Road, Crewe Toll, where the firm inherited 109,000 sq ft when it bought Deutsche Bank’s securities division in 2002.
Aberdeen Asset Management is in talks to let 10 George Street, owned by Danish fund KP, which is being advised by Cushman & Wakefield.
Aberdeen appointed Ryden to seek 60,000 sq ft. It presently occupies almost 90,000 sq ft across 40 Princes Street and 60 Morrison Street, which house around 800 staff.
EY is under offer on 30,000 sq ft at Deka’s Atria building, where rents are £29.50 per sq ft. The company is moving from 10 George Street, where it occupies around 35,000 sq ft. CBRE and Savills are the letting agents on Atria; Cushman & Wakefield is advising EY.
Although Edinburgh is known as a hub for professional and financial services, companies in the sector accounted for just 8% of take-up last year and 23% since 2010. All three of the deals being finalised are driven by lease events rather than a need to expand.
Since the Scottish independence referendum in September 2014, the only major letting to a financial tenant has been Standard Life’s deal to take the entire 108,564 sq ft at 6 St Andrew Square, a £75m development by the fund manager’s own Pooled Pension Property Fund and Peveril Securities.
Comment: Danny O’Neill, chief executive, Ediston Real Estate
The market sentiment for financial occupiers is generally not positive for Edinburgh, which is a financial sector-driven market.
Comparing it 10 years ago, when six or seven financial occupiers were in expansion mode, with now, when apart from Standard Life there have been no substantial deals, I don’t think the city has been particularly entrepreneurial in winning new business.
Edinburgh has to deliver modern accommodation to occupiers. If it doesn’t, they will go to Birmingham or Manchester.
The speculative developments won’t have missed out, because tenants are unlikely to prelet a building that is 18 months away from completion – that is very rare in Scotland – but financing is a big issue and I am not convinced we will see significant development in Haymarket in the long term.
I don’t see the demand coming through from occupiers.
The impact of Brexit will be felt harder in Scotland and, of course, financial organisations think the noise about the second independence referendum is unnecessary.
From an investor’s point of view, Scotland is at a bit more of a risk. Saying that, I would love to do more development in Edinburgh, if we found a site and good-quality buildings. But now is not a good time for speculative development.
| Edinburgh’s development pipeline | ||
|---|---|---|
| Site | Developer | Sq ft |
| Biggest development projects under construction | ||
| Quartermile 3 | Moorfield | 73,000 |
| 2 Semple Street | GSS Developments | 37,500 |
| Development pipeline 2016-18 | ||
| Capital Square | Hermes | 121,000 |
| The Mint Building* | Chris Stewart Group | 60,000 |
| The Haymarket 5 | Tiger Developments | 92,000 |
| New Waverley | Artisan | 160,000 |
| India Quay | EDI | 133,500 |
| Total (development pipeline 2016-18) | 566,500 | |
* in talks with legal firm Brodies. |
||
| Completed grade-A buildings with more than 50,000 sq ft vacant | ||
|---|---|---|
| Atria One | 40 Torpichen Street | 1-7 Exchange Crescent |
| Landlord: Deka | Landlord: Triuva | Head tenant: Standard Life |
53,430 sq ft |
54,286 sq ft |
64,882 sq ft |
Source: CBRE |
||
Financial and banking sector lettings
Biggest deal since the referendum
6 St Andrew Square, 108,564 sq ft
let to Standard Life Investments 15-year lease Q4 2014
Proportion of take-up by financial service occupiers in Edinburgh
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