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ABERDEEN INDUSTRIAL SALE MARKS LATEST INVESTMENT DEAL FOR KNIGHT FRANK


C


ommercial property investment opportunities in Aberdeen are continuing to attract national and international interest, as the


latest significant deal concluded by Knight Frank underlines. The specialist’s north-east team represented


Chris Ion


developer Dandara in the £5.4million sale of a 20,000 sq.ft industrial unit at the Badentoy North Business Park to the south of Aberdeen at Portlethen. The unit, which has been pre-let to KCA Deutag Drilling on a minimum 20-year lease, has been bought by the pension arm of a Footsie 100 Company. It is under construction and due for completion in March 2016. Chris Ion, an Associate in the Aberdeen office


of Knight Frank, said: “We firmly believe the right investment opportunities in Aberdeen will continue to appeal and this deal is another demonstration of that. “We have seen at close quarters the challenges facing the oil


and gas sector, and the north-east of Scotland as a whole, but on- going activity in the North Sea sector continues and in turn there are still requirements for modern industrial facilities such as those being provided by Dandara at Badentoy North. “With a high profile tenant in KCA Deutag Drilling secured, this


unit was understandably a strong investment proposition. There were four interested parties and we are delighted to have concluded an agreement with the preferred investor.” Badentoy North, with easy access to the A90 providing strong


road links to existing networks and in future to the Aberdeen Western Peripheral Route, is a 60 acre site with Schlumberger Oilfield UK and DPD Group also secured as tenants. The KCA Deutag Drilling unit comprises 19,988 sq.ft of


workshop and office accommodation with an additional 107,000 sq.ft of yard space.


AB1 - KNIGHT FRANK CONCLUDES ABERDEEN CITY CENTRE OFFICE DEALS


T


wo key tenants have been secured for the AB1 office complex in the heart of Aberdeen city centre by Knight Frank. Aberdeen Asset Management’s development was officially re-


opened earlier this year after a multi-million pound refurbishment project, undertaken in a joint venture with Manse LLP, was completed on the Huntly Street site formerly known as Langlands House. The Oil & Gas Authority (OGA) became


the first tenant when it took occupancy in 2015 and the organisation will be joined by two further Government agencies. The Crown Office and Procurator


Fiscal Service (COPFS) has taken 10,500 sq.ft of first floor space whilst the Department of Communities and Local Government, will occupy 7,800 sq.ft on the second and third floors to house staff from the Department of Energy and Climate Change. Both organisations have signed a 10-year lease. Knight Frank and joint letting agent Ryden are reporting strong


Matt Park


interest in the remaining 17,000 sq.ft of office accommodation, despite a backdrop of challenging conditions in Aberdeen’s commercial property market due to the downturn in the oil and gas industry. Matt Park, a Senior Surveyor in Knight Frank’s Aberdeen office,


said: “Whilst our own research has highlighted the high level of supply, with more than two-million sq ft of office accommodation currently available in Aberdeen, Knight Frank has always maintained there will continue to be movement and the team is working hard on behalf of our clients to identify opportunities.”


ABERDEEN…….. WHERE ARE WE NOW AND WHAT NEXT …? W


ith the collapse in the Brent Crude oil price in June 2014 from the dizzy


heights of $115 to the low of $28 seen in January this year the Aberdeen property market continues to be impacted by the downturn in the Oil & Gas sector and the prospect of any meaningful recovery in the short term seems remote. The majority of businesses are looking to “batten down the hatches”


Bruce Murdoch, Partner in the


Aberdeen office of Graham + Sibbald


and reduce overheads at every opportunity. Whilst there is activity in the lease renewal/extension market(s) the transactional market is seeing minimal activity. Whilst no sector is immune it is clearly the office market that has borne the brunt of the downturn. The industrial market has shown greater signs of resilience but it did not face the perfect storm experienced by the office market which experienced a significant increase in supply due to the high level of new development of new space predominantly off the back of pre-lets agreed in 2012 to


COMMERCIAL PROPERTY MONTHLY 2016


2014 meeting the fall in demand from late 2014. Discretionary spend in the city has also fallen which has affected the leisure sector and demand for hotel accommodation has dropped dramatically with significantly lower occupancy levels and room rates. Similar to the office sector hotels also saw an increase in development activity triggered by the previously buoyant market. It is widely acknowledged that the


amount of available office accommodation on the market in now in excess of 2million sq.ft. which is approximately three times the pre- downturn level of availability and excludes space not being actively marketed by occupiers, who are under occupying their accommodation and see little merit in space planning to release surplus space. Aberdeen has a reputation for being


contra-cyclical which can be one of its appeals to investors ..! It has been said that Aberdeen is currently experiencing its own recession that the rest of Scotland (.. and the world..) endured, for very different reasons, in the period 2009 to 2013. Whilst United Kingdom Continental Shelf (UKCS) is one of the most expensive


locations on the planet to produce oil and gas the positive outcome of the current downturn will see the oil and gas sector tackle the previously escalating costs of production which will enhance the future viability of the region. It should also be borne in mind that prior to 2014 only 48% of the oil and gas activity in Aberdeen was connected with UKCS and 52% supported activity in the rest of the world. With current reduction in investment in UKCS there will be an even greater level of overseas activity supported out of Aberdeen The current depressed level of the oil


price has been caused by the well documented over supply in the market however it is not always appreciated that the demand for oil has also increased in recent years. Clearly before there is the recovery in the oil price the fall needs to be arrested and a period of stability achieved. Over the past month the price of Brent Crude has risen from by over 32% from $28 to $37 which an Aberdeen perspective is encouraging and whilst it is early days to predict the start of the recovery in our property market the Aberdeen market will be ready to provide the market with required space ….. and an early Date of Entry..!


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