Commercial property landlords in Scotland’s major cities are increasingly looking to refurbish older buildings in order to meet changes to working practices and plug the gap in new ‘Grade A’ office space, the latest research from Colliers International shows.
Property investors in both Edinburgh and Glasgow are showing increasing interest in both refurbishments and direct development, according to the Office Market Commentary 2016-18, amid a growing demand for city centre offices around the UK. Companies are also increasingly looking for facilities that support work from home policies, desk sharing and cycling to work, as they adjust to modern lifestyles and work expectations.
Douglas McPhail, head of Colliers International in Scotland, said refurbishments that took Scotland’s changing working practices into account made office buildings far more likely to find an occupier.
“It is significant that employers are thinking much more about what their office workers’ expectations are when they look for premises, and seek to make the office experience more attractive and engaging. Facilities for bikes, showers and lockers for cyclists and joggers; versatile and flexible office accommodation with a comfortable, almost leisure-like feel; common areas for break-out meetings and work, good Wi-Fi and perhaps a cafe; these are the kind of buildings that appeal to modern and agile business. Office buildings may now even achieve a ‘Bike Score’ which rates how cycle friendly they are.
“I don’t think this is a fad - I think it’s the way we are going to see people working and integrating with their work environment from now on.”
With occupiers looking for quality space in the city centre, Colliers’ market commentary shows that a lack of ‘Grade A’ space is driving landlords and institutional investors to take an interest in ‘Grade B’ properties which they can then refurbish. This was true across the UK regions, with most areas also seeing growing demand for city centre space as opposed to business parks. Both Edinburgh and Glasgow were among the cities where occupiers were increasingly looking at desk-sharing policies and work-from-home in an effort to find suitable premises while also keeping staff happy.
McPhail said: “One of the issues is that in Glasgow and Edinburgh there is not enough supply of Grade A stock - in fact in Glasgow it has all but run out. The lag in terms of building new offices is at least two, but probably three years. What we are going to see, therefore, is an increase in rents and a lot more interest in refurbishment of older buildings.”
It was recently reported that the price of Edinburgh office space is set to top £40 per square foot in the next three years.
Colliers’ commentary also showed that interest from investors in the Asia-Pacific area, which was flat in 7 out or 9 cities or regions surveyed, increased in Edinburgh. Institutional interest in office development increased strongly since 2016 in 6 of 9 UK regional centres.