Steve Judge, founder and managing director of Space Solutions, explains a growing trend in commercial property.
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In Aberdeen’s commercial property landscape, a significant shift is underway as market conditions create both challenges and opportunities. Economic uncertainty combined with high construction costs, elevated interest rates, and challenging borrowing conditions is creating substantial headwinds mean new-build development is presently unviable for both office and industrial spaces. This perfect storm has turned attention toward existing building stock, where strategic refurbishment is emerging as a more viable solution for meeting market demands.
It’s not that there’s a lack of space
In the office sector, there has been a clear flight to quality in recent years. Premium spaces like the Capitol Building, Silver Fin, and Marischal Square were all completed during the last development cycle between seven to ten years ago and are essentially full, with no new office developments in the city centre since. Because we’ve seen a weakening in the market over the last several years, rents have come down, making the investment in new builds unviable for developers. The problem isn’t that there’s a lack of supply of space, it’s that there’s a lack of supply of good quality Grade A space.
So, what’s the solution? Up until two years ago, a building that was listed didn’t attract rates if it was lying empty. With a change in that legislation and the removal of rates relief, landlords and building owners have been faced with the need to reassess their buildings. These market conditions and the change to rates relief means we can find opportunities for well-refurbished properties to meet the demand for better quality office space.
Understanding the art of the possible
© Supplied by Space SolutionsOur role is to help landlords find the answers to those crucial questions about their assets. What would it cost me to make this asset more appealing? What do I have to do to make it more energy efficient? What are the criteria that discerning occupiers are using to select space? Recent projects show refurbishment of these buildings to be a success. Number 3-5 Albyn Place was sitting vacant before we undertook an extensive CAT A refurbishment on the property, improving energy performance and providing over 21,000sqft of prime lettable office accommodation. The same for the former Caledonian House on Union Street, which will be known as Aurora once refurbishment of the 55,000sqft space is complete in early summer.
It’s not a one-size-fits-all approach. In the case of 3-5 Albyn, there was heavy investment in refurbishing that building to an EPC A Rating, but that might not be achievable or plausible for the next client. So, it’s a matter of using our skills and experience and working in close concert with customers — landlords and occupiers — to understand how they get the most bang for their buck.
We’ve also seen an increasing trend toward ‘Plug & Play’ solutions, where landlords opt for comprehensive fit-outs to create ready-to-occupy spaces. This approach reduces barriers to entry for potential occupiers by addressing concerns about fit-out costs, furnishing, and IT infrastructure upfront. While this represents additional initial investment for landlords, the long-term value of securing quality tenants often justifies the expenditure.
If you build it, will they come?
In the industrial sector, the landscape is very similar, although arguably the demand for industrial space is more pronounced than it is in the office sector. Such is the nature of Aberdeen as an operational location, with traditional oil and gas, exploration and production activities, as well as activities associated with energy transition. The supply doesn’t meet the demand that currently exists for good quality space. It’s the same principles: what are the better quality properties that with investment will be more appealing to a wider audience of potential occupiers. There’s movement there, however, and we’re potentially getting closer to that tipping point where it becomes viable to build because workshop and warehouse rental levels are rising.
The market is the market, and we can’t do much to change conditions, but we can adapt and respond to it, finding opportunities out of the challenges. As Aberdeen’s property market continues to evolve, the focus on refurbishment and repurposing of existing buildings represents not just a temporary solution to current market conditions, but a sustainable approach to meeting commercial property needs.
Steve Judge, Founder and Managing Director
Steve founded Space Solutions in 1997. Over the last 28 years, he’s created a thriving business built on the foundations of strong industry knowledge, and a genuine passion for creating workspaces that support the people and businesses who inhabit them. If you’d like to speak with Steve about workplace change, email him at steve.judge@spacesolutions.co.uk.
