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Spotlight
Spotlight Glasgow office market
Edinburgh Offices
Leasing market supply and demand ■ Take-up of office space in Glasgow in the second half of 2012 was a rather underwhelming 137,870 sq ft. This was lower than the take-up in the first half of the year, and brings the total for 2012 to a below average 371,870 sq ft.
■ However, as Graph 1 shows, this level of take-up is pretty much in line with the pre-boom levels that the City experienced, and we believe that a "normal" year's take-up in the City is probably around 400,000 sq ft, making 2012 merely a slightly below average year.
■ While the second half of 2012 did not see any specific leasing deals of note, the biggest news for Glasgow's office market has undoubtedly related to Scottish Power's new HQ on the former Elphinstone Tower site. There was a time that the speculation was that this 220,000 development wouldn't happen, but the latest news is that the JV between Helical Bar and
GRAPH 1 2012 take-up was 6% up on 2011 SUMMARY
■ Take-up in the second half of 2012 was weaker than in the first, but overall the year was 21% up on 2011.
■ Availability continues to fall, and we estimate that by the end of 2012 only 15% of the vacant office space was of Grade A quality.
■ Rents remain flat in the core, but continue to fall in the fringe. However, we expect to see upward pressure on prime CBD rents beginning this year.
■ The investment market remained fairly quiet in the second half of 2012. However, Edinburgh remains a credible location for domestic and international investors, and we expect to see steady demand for prime assets in 2013.
100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000
0 Source: Savills
“In the short term we believe that headline rents in Edinburgh will hit £30/sq ft.” Kate Graham, Savills Edinburgh
savills.co.uk/research 01 Take-up 10 yr Avg
Dawn Developments is close to being forward funded by PRUPIM. Scottish Power is believed to be paying £25/ sq ft on a 25 year pre-let. This will clearly free up Scottish Power's existing HQ for a new development or refurbishment.
February 2013
■ While this has not soaked up any available space in Glasgow, it is a sign that major businesses are having the confidence to commit to new offices, and a vote of confidence in Glasgow as a major employment location.
■ The supply-side of the market remained pretty stable over the second half of 2012, and we estimate that at the end of the year the overall availability was marginally up on the mid-year total at 2.3m sq ft.
■ Grade A availability in the City remains low, accounting for only 30% of the City's total availability of office space. Less than 400,000 sq ft of this is new, and this shortage is why the speculative development pipeline is beginning to open.
February 2013
Rents ■ The second half of 2012 saw a complete lack of Grade A quality transactional evidence. As such we are fairly cautious on prime achievable rents in the City at present and estimate that £27.50/sq ft remains the benchmark for top quality office space in Glasgow (as set by JP Morgan on Bothwell Street early last year).
■ The limited current availability of brand new office space in the City, combined with the restrained development pipeline, should support rents at this level in 2013. Furthermore, there could be some shortening in the rent-free periods on offer which currently stand at 30 months on a 10 year lease..
■ Outside the CBD prime office rents have stayed at their mid-year level of £14.50/sq ft.
Investment market ■ The investment market saw a pick up in activity in the final quarter of
GRAPH 2 Availability remains high
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000
500,000 0 Available Grade A Grade B
Source: Savills
savills.co.uk/research 01
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For further information or advice, please contact:
Mat Oakley Head of Commercial Research +44 (0) 20 7409 8781
moakley@savills.com
savills.co.uk/research
Savills World Research UK Commercial
Savills World Research UK Commercial
Spotlight
Manchester Offi ce Market
Review and Outlook Central London office
GRAPH 1
Central London office take-up picked up slightly in 2012
10 12 14
0 2 4 6 8
GRAPH 2
The vacancy rate has risen to 6.7% due to development and refurbishment activity
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
February 2013
March 2013
SUMMARY Graph source: Savills Graph source: Savills
■ Helped by a strong fourth quarter, 2012 take-up ended the year at 780,850 sq ft, a 16% increase on 2011. We expect 2013 to reach similar levels.
SUMMARY
■ Take-up in 2012 was broadly the same as the 2011 total. The City of London saw take-up rise to average levels, while the West End and Docklands had a below average year.
■ The overall central London vacancy rate rose due to a slight pick-up in development completions, and a more robust rise in refurbishment activity. Despite this there are pockets of undersupply in many size bands and locations, and these are where rents are beginning to rise.
■ Prime rents rose by 4-5% in central London last year. We are expecting slower but steady rental growth over the next five years
■ Investment in central London offices rose to over £15bn in 2012, with more than 65% of the purchases being by non-domestic investors. We expect this trend to continue in 2013, albeit with some non-domestic investors becoming more adventurous on location or security of income.
■ Grade A take-up remained below average in 2012, however, with a rise in Grade A leasing activity in the fi nal quiarter of the year, this might well be the fi rst sign of spring in the Manchester offi ce market.
■ Grade A availability, is now signifi cantly under pressure, with only 33% of the currently available space being of Grade A quality.
■ The fi nal quarter of 2012 saw a reconfi rmation that the top acheivable rent in Manchester remains at £30/ sq ft. This was achieved on an expansion-driven letting at DEKA's Belvedere.
■ Prime yields have remained stable at 6.25% for the whole of last year, and with prime London offi ce yields continuing to harden Manchester is increasingly becoming an attractive proposition for UK and international buyers.
“The fi nal quarter of 2012 saw a rise in Grade A leasing activity to 18% of the total. This might well be the fi rst sign of spring in the Manchester offi ce market.”
savills.co.uk/research 01
“We expect to see a steady rise in leasing activity in the more affordable fringes.” Mat Oakley, Savills Research
savills.co.uk/research 01
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