Demand for office space in the Granite City will more than double this year along with the rising oil price, a new report has found.
Aberdeen’s office market is on course to exceed 400,000 sq ft of take-up during 2022, despite the number of lettings easing in the third quarter, according to Knight Frank.
The largest deal of the third quarter of 2022 was Dolphin Drilling securing 9,000 sq ft of office space at D2 Business Park in Dyce, as the continuing high price of oil boosted offshore activity.
With several transactions already underway and likely to conclude next quarter, Knight Frank predicted Aberdeen will breach 400,000 sq ft of office deals by the end of the year – a significant increase on the 197,000 sq ft recorded during 2021.
The commercial property consultancy said that 47,926 sq ft of office space was transacted in the Granite City between July and September.
Combined with the 195,905 sq ft and 60,521 sq ft during the first two quarters, respectively, take-up for 2022 so far has reached 304,352 sq. ft.
Matthew Park, partner at Knight Frank Aberdeen, said: “Although take-up slowed, there were 19 deals concluded in the third quarter – office activity so far in 2022 demonstrates that Aberdeen is bouncing back from the effects of the Covid-19 pandemic.
“There are enough transactions in the pipeline to believe that we can surpass 400,000 sq ft for the year, which would be more than double 2021’s total.
“The sustained high oil price at around $100 per barrel and the prospect of more than 100 new North Sea licenses being awarded, to boost domestic oil and gas production, in the next licensing round is trickling through into property deals, with more oil services and drilling companies issuing contract-led requirements.
“All things being equal, we would expect that to continue in the final quarter and into 2023.”
Meanwhile, BNP Paribas Real Estate successfully completed on the sale of the Aberdeen HQ of global energy group Equinor on behalf of Golden Globe to a private overseas investor for £20 million.
Gary Cameron, head of Scotland at BNP Paribas Real Estate said: “Aberdeen has witnessed a scarcity of prime office deals in the last few years in what most will accept, has been a subdued market.
“However recent world events and the energy cost crisis have brought a stark focus on UK energy security and a renewed commitment to the North Sea.
‘’We believe the Equinor House sale marks a shift in investor appetite for Aberdeen and a turning point for the city.
“Demand for the city won’t be a blanket one but for select assets offering the combination of location and secure and sustainable income, Aberdeen can offer investors really good value.”
The 46,000 sq ft Equinor House is fully leased to the Norwegian state-owned firm until March 2032 and has fixed rental uplifts of 2.5% pa.
Equinor House was developed by Drum Property Group for the occupier in 2015. Advised by BNP Paribas Real Estate, Golden Globe acquired the asset in 2018.
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