The confirmation last week that Aberdeen will indeed be home to GB Energy headquarters, and Keir Starmer stating that the new, publicly owned clean energy company could only ever be based in the Granite City, represents a significant opportunity for the commercial property market in the Northeast.
According to recently published figures, Aberdeen’s commercial property market reached its highest level of investment since 2018 in the first six months of this year. The industrial sector showed particular strength as the second most active area after retail, driven by one large transaction.
This growth is expected to continue and, with GB Energy now to be based in the city – backed by £8.3m from the Scottish Government to invest in clean energy and make the UK a world leader in floating offshore wind, nuclear power, and hydrogen – confidence in the commercial property market in Aberdeen is expected to surge.
The Northeast’s heritage, and the knowledge and skills that have been grown and honed here over the past 50-plus years through the offshore oil and gas industry, mean the region has a significant role to play in the energy transition.
This, combined with our proximity to ScotWind developments, the recent £400m expansion of the Port of Aberdeen, a strong supply chain and global recognition as a world leader in transition, makes the region a compelling investment proposition.
However, uncertainty remains over how the energy transition will play out and what role GB Energy will play, not to mention doubt over the impact of next month’s UK budget on the oil and gas sector.
A managed and just energy transition is crucial to avoid negative repercussions – like the recent closure announcement at the Grangemouth Oil Refinery, where 400 jobs are immediately at risk and thousands more are indirectly affected.
Much of Aberdeen’s commercial property is taken up by oil and gas companies and those servicing the industry: if they were to close overnight, there simply wouldn’t be the equivalent-sized green energy businesses ready to step into their shoes, occupying large vacant spaces and replacing lost jobs.
This could be catastrophic for the commercial property market, not to mention for local people and the economy, and highlights the need for both the Scottish and UK governments to manage the transition very carefully, always keeping an eye on the longer term.
To encourage more green businesses to grow and settle in the city and the wider region, we need to see more investment in industrial spaces.
Demand for good quality, refurbished industrial stock remained high in the first quarter of 2024, but total supply was down 25% on the previous three months.
Rising rent costs are a direct consequence of the lack of good quality space, and stubbornly high construction costs mean there hasn’t been sufficient investment in industrial property.
Improvements to the existing stock of industrial units should be stimulated by demand, and it’s a similar story for office space in Aberdeen, where total office stock decreased by 16% in the first three months of the year against the backdrop of an ongoing shortage of Grade-A office facilities.
When the demand is there, high-quality office space is taken up very quickly when it does become available.
More businesses from outwith the energy sector are also increasingly seeking space with strong green credentials, and many lenders’ policies mean they will now only lend on properties of a certain EPC level and above.
This demand will only increase as we move towards net zero over the coming decades, and sectors like professional services that want to benefit from the opportunities that come with the energy transition will undoubtedly look to be closer to GB Energy, which has the potential to bring a flood of new businesses into the region.
The energy transition brings with it a vast opportunity for the Northeast’s commercial property sector, but investment in the right type of industrial and office space, and a carefully managed transition, are needed if we are to capitalise on that opportunity.
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