Aberdeen has continued to suffer a slump in demand for new office space just as supply soars to its highest level in years, new figures show.
Ryden’s 78th Scottish Property Review reveals office take-up in the Granite City fell by 71% to 83,150sqft during the six months to March alone as the market reeled from the impact of the oil and gas downturn.
The 364,735ft of new accommodation firms signed up for during the 12 months to March was less than half the 10-year average. Office supply has increased by a whopping 37% to 2.4millionsqft, including projects currently under construction.
Ryden says office deals in Aberdeen have also reduced in number but, more significantly, the kind of large transactions that were common before the oil price slump have dried up.
The biggest deal during the six months to March was for 10,550sqft of the AB1 building in Huntly Street, leased to the Crown Office and Procurator Fiscal Services.
By contrast, Ryden says office take-up in Edinburgh during the year to March was the highest since 2000.
But Aberdeen continues to lead the way for prime office rents, with Ryden reporting a current price of £32 per sq ft – higher than Glasgow’s £30 figure, with sites in Edinburgh and Dundee generating £28 and £15 respectively.
Ryden partner and office market expert Arron Finnie said future rents in Aberdeen city centre were hard to forecast.
The state of the local economy and its impact on demand for space in prestigious new developments such as The Capitol, the Silver Fin and Marischal Square would dictate prices, he added.
But locations farther out, like Altens, and areas outside the city boundary – such as Westhill – may see rents reduce over time, he warned.
Mr Finnie said the one glimmer of light in an otherwise gloomy office scene in Aberdeen just now was the amount of better quality accommodation coming on to the market.
It will attract interest, given time, he said, adding: “It is what’s left that could then be a problem.”
A likely exodus of firms from older properties in the city, particularly in the west end, could create a lot of unwanted stock, he said.
Aberdeen-based Ryden partner Paul Richardson said the local industrial market was “tougher”, with tenants now having the upper hand.
Rent-free incentives of three to four months were becoming common, he said, adding he would not be surprised to see offers stretching to more than a year. Ryden partner and property investment expert Ken Shaw said there was no doubt the depressed state of the local economy was putting potential buyers off. But Aberdeen was not alone in Scotland in suffering a dearth of big property investment deals amid ongoing political uncertainty about Scotland’s place in the UK and Britain’s continued membership of the EU, he added.
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