Oil’s dominance of Aberdeen’s economy helped the city largely sidestep the recession, but this strength is not always reflected by investors’ view of the city. “Aberdeen has been incredible,” says Savills’ Nick Penny. “But some funds just don’t get it.”
The economy is dominated by oil companies, and their staff have considerable influence on the property market. These companies need to differentiate themselves to attract and retain employees. After salaries, modern offices with impressive facilities is one way this is achieved, along with an out-of-town location that enables staff to drive to work without suffering traffic congestion. The result is a chain of new developments along the route of the long – and still – awaited bypass, the Aberdeen Western Peripheral Route.
Abstract Group is developing the 1m sq ft Aberdeen International Business Park next to the airport for Norwegian investor Aker ASA. Abstract has let the 335,000 sq ft first phase to oil services company Aker Solutions, 34%-owned by Aker ASA. Aker Solutions has leased the space for 20 years on indexed leases for £7.74m pa. Aker plans to sell the investment and Abstract Group CEO Mark Glatman believes the first phase will fetch £130m.
Another edge-of-Aberdeen scheme is Drum Property Group and Aberdeen City council’s £500m, 1m sq ft Prime 4 project at Kingswells, to the west of the city. Tenants here include Apache, Transocean, and Statoil. Phase 1 was pre-funded with F&C REIT in 2011 at 6.25% on 15 to 20 years’ income. “They have seen a significant increase in values and as it was based on low rents they will have made money off subsidised deals,” says Penny.
In the city centre, “Older, more dilapidated space is going to have to up its game because of the shortage of engineers in Aberdeen,” says Colliers’ Tom Fulton. Several schemes are under way or planned such as The Grande, Drum’s £100m redevelopment of the former Seafood Park where phase 1 is prelet to oil company EnQuest. Among other town centre schemes is Muse Developments £107m Marischal Square scheme, fully funded by Aviva Investors, where 175,000 sq ft of offices and a four-star hotel could be built after planning consent is granted.
Key Facts
Major employers Aberdeen’s top companies in terms of turnover (2013) include Total Upstream UK, Chevron North Sea and First Group. Aberdeen Asset Management is on the list too. Other prominent oil firms include John Wood Group and Haliburton.
Airport Partly as a result of oil workers, Aberdeen airport is thriving and carried 3.5m passengers in 2013.
Population The city has a population of almost 225,000 – or about 4.2% of the Scottish total.
University The city has two universities: the University of Aberdeen, which enrols 13,000 students, and Robert Gordon University, which focuses on business, design and technology. RGU was recently named the top UK university for graduate employment: 97.7% of 2012-13 graduates were in a job or further study.
