News Article

Watching and Waiting

31/07/2008

 THE HERALD COMMERCIAL

Many prospective occupiers are now biding their time until the huge choice of new office buildings comes on to the market next year, reports Bob Serafini THE severe shortage of Grade-A office space in Glasgow city centre is now having an impact on occupier strategy, according to a new market report published today by commercial property advisers Colliers CRE. With only 148,000 sq ft of prime accommodation to choose from, a large chunk of it outside the traditional core business district, a number of firms with known requirements to move appear to be carefully considering waiting until next year, when an absolute deluge of 800,000 sq ft of new top-of-the-range space is predicted to emerge.

“We anticipate many occupiers will put their acquisition process on hold until 2009 when they will have more options open to them,” said Jonathan McManus, Colliers‘ offices director in Glasgow.

“With availability massively down, a good building such as 4 Atlantic Quay (47,000 sq ft remaining) should be fully let, but some people are just unsure, want to be in the core area and are waiting for the right opportunity. "Larger occupiers may not want to miss out on one of the prime buildings coming next year and could strike a deal to get the best floors,”

He argues that, while demand has undoubtedly slowed from last year’s bonanza 750,000 sq ft, with take-up to date down 40%, there is some comfort that the credit crisis is having a less pronounced effect on markets outside London and the south-east. Due to the constrained supply, rental levels for the best office space are predicted to edge upwards from the headline £27.50 per sq ft recently paid by Semple Fraser at 123 St Vincent Street before stabilising when the 2009 properties come through. Cuprum, a 98,000 sq ft Taylor Wimpey/Kenmore development on Argyle Street, is due for completion in December but unlikely to impact until the new-year, unless it pulls off a major coup. Like several other city centre and out-of-town schemes such as Maxim at Eurocentral, it is believed to be chasing a large requirement from Barclays Bank.

The three largest new schemes completing next year are PPG’s 175,000 sq ft 141 Bothwell Street (pre-lets in place to McGrigors and HSBC), HF Developments’ 129,000 sq ft G1 in George Square (rumoured in the market to be pursuing Ernst & Young) and IVG/Ediston’s 125,000 sq ft first phase of Broadway at Cowcaddens. Colliers themselves are the agents on one of two new prospects in Hope Street, previously unfashionable but improving, which scores highly in sustainability terms as it adjoins Central Station, offering good public transport for staff.

Their Copenhagen building, due for completion by next summer, combines traditional and contemporary architecture to create 53,000 sq ft of space McManus is very optimistic about this pension fund-driven development, partly because of the 6500 sq ft floor plates.

“This allows us to hit a large part of the market which the big bold schemes can’t actual reach,” he said.

“Those firms employing perhaps 50 to 75 people are not really going to end up in the very large buildings. “We are quoting £25 per sq ft, which is undercutting prime rents, for a property which has a high specification and favourable location. Next door, Stockland Halladale’s 56,000 sq ft project at 1 Waterloo Street is also under way and the two developments should help lift this much neglected part of the city centre.”

Colliers’ data shows the financial and professional sectors still providing the backbone of the Glasgow office market, with 6 of the top 10 office deals in 2007 going to occupiers in this category.

“For a few years from 2001, the public sector carried the market, but this has now slowed to around one-quarter of take-up,” said McManus.

He puts the total current requirement for new space at 250,000 sq ft and has a new sales line to attract tenants: “Our calculations show that, if occupiers extend where they are and don’t move office, they are likely to get a lesser financial deal to the tune of 10%. “On most occasions, you are actually better to move because your negotiating hand is stronger. Existing landlords always bank on the fact that people don't want the hassle of having to move shop.”