WeWork has launched freehold and leasehold office requirements in Glasgow and Edinburgh for its debut in Scotland.
The flexible workspace giant is instructing CBRE on potential building acquisitions for its own real estate investment fund.
It is looking for spaces of more than 30,000 sq ft, and is favouring existing buildings over new-builds so that it can accelerate its expansion.
However, there are very few vacant premises in the market that meet its specifications, so it is likely that WeWork will need to exercise some flexibility. Some of the available assets in Glasgow and Edinburgh measure more than 70,000 sq ft each.
Looking for leaseholds
In a separate mandate, JLL is advising WeWork on a search for circa 40,000 sq ft leaseholds in each city .
It is therefore broadly estimated that WeWork will end up taking around 100,000 sq ft to 150,000 sq ft in total across both cities. All parties declined to comment.
CBRE’s role suggests the serviced office provider is broadening the scope for ownership where possible, tying in with its strategy to build up its own property portfolio.
Last year WeWork acquired 51 Eastcheap, EC3, for around £48m and 120 Moorgate, EC2, for around £40m. It also bought a 10% stake in the £580m purchase of Devonshire Square, EC2, from Blackstone in April.
WeWork has also begun to diversify its business model, including pursuing larger corporate tenants, shifting more leases to co-management deals and lengthening member lease terms.
Lack of supply
But the search for its debut office premises in the Scottish cities could prove to be tricky. Edinburgh is facing a lack of supply alongside occupier demand.
Research by JLL published last month found that high-quality space office is in increasingly short supply in the city, with total Grade A vacancy at just 1.4%.
JLL noted that high demand is causing occupiers to consider their options as early as possible, leading several to consider refurbished stock.
Booming occupier demand
Office lettings in Edinburgh for Q2 spanned 350,000 sq ft between April and June, across 45 deals – more than double the take-up it recorded in Q1.
Meanwhile occupier take-up in Glasgow hit a ten-year high during H1 2018. Lettings in Q2 spanned 326,313 sq ft across 32 deals between April and June, reflecting a 50% rise on the same period last year.
In the largest Glasgow office deal, Clydesdale Bank signed for a 110,955 sq ft pre-let at 177 Bothwell Street.
But sustained activity in the first half of 2018 has led to diminishing supply in the Scottish city. The market total vacancy rate stood at 6.9%, while the new-build rate was 0.2%.
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