Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

Dan Smith: How do we tackle dearth of quality city centre office space in Aberdeen?

'This is a chance to push older, functionally obsolete office space back to the front of the queue'.

Dan Smith, of Savills.
Dan Smith, of Savills. Image: Scott Baxter/DC Thomson

The Aberdeen office market, much like in the rest of the UK, has seen a strong flight to quality among occupiers.

Firms are looking to attract and retain skilled staff post-pandemic, while also achieving their net-zero aspirations.

However, unlike many other regional UK office markets, Aberdeen has seen a dearth of recent office development. In fact, the last noteworthy schemes to be built were The Capitol, Marischal Square and Silver Fin building, all of which were completed in 2018.

Lowest Grade A vacancy rate on record

As a result, we are now seeing a reduction in the availability of best-in-class office space in the heart of the Granite City. Grade A city centre accommodation has a vacancy rate of just 2%, the lowest figure on record.

Despite this, exorbitant construction costs and ever more stringent regulatory requirements continue to call into question the viability of new-build stock. While this phenomenon is becoming more common throughout the UK, it is particularly prevalent in smaller regional markets like Aberdeen.

Marischal Square in Aberdeen.
Top quality office space in Aberdeen city centre, like that found at Marischal Square, is next to non-existent. Image: Scott Baxter/DC Thomson

Comparatively low headline rents in these markets cannot sustain recent build cost inflation. What’s more, the push for greater leasehold flexibility and uncertainty surrounding market longevity are making office cost appraisals increasingly difficult.

With this in mind, how will businesses continue to find suitable space in Aberdeen city centre?

While there is still immediate availability within some of the best-in-class schemes for smaller, sub-20,000sq ft occupier requirements, current demand levels suggest it won’t be around for much longer.

Firms face choice of paying more rent or compromising on office requirements?

So, what happens next? Occupiers will need to accept paying rents at a level that will facilitate new development or comprehensive refurbishment, or else compromise on their sustainability requirements. The first of these two options is unlikely to be supported by any historical, comparable evidence.

However, with ESG (environmental, social and governance) front and centre for most corporate occupiers these days, paying higher rents is likely to be the more likely option for most.

Taking account of embodied carbon, the refurbishment of existing building stock is the most environmentally sustainable option. It also aligns far better with the Scottish Government’s National Planning Framework 4, which advises against demolition and redevelopment.

The Capitol building on Union Street.
The Capitol building on Union Street. Image: Andrew Morton/DC Thomson

In the majority of cases, it is also anticipated that comprehensive refurbishment of Grade B buildings will be less expensive than a new build, making cost appraisals more palatable.

But refurbishments are still not immune to cost inflation and so rents will also need to move on to ensure development feasibility. In Glasgow, where there is greater Grade A supply than in Aberdeen, there have already been reports of rents for top quality refurbished space outpacing that of some new builds. The rationale here being an increased focus on buildings that are prime in terms of location and amenity provision.

Silver Fin building, Aberdeen.
Aberdeen’s best city centre office locations, such as the Silver Fin building on Union Street, are mostly fully let. Image: Kath Flannery/DC Thomson

This should present new opportunities for landlords with older properties, many of which are facing an uncertain future in light of looming ESG regulation and overall market contraction.

Almost all office demand is now centred around energy efficiency and amenity. Given the lack of development pipeline, this is a chance to push older, functionally obsolete office space back to the front of the queue.

Leap of faith

While a commitment to a costly refurbishment still requires a leap of faith, there are a growing number of examples across the city, including Blenheim House and 42 and 27 Albyn Place, where landlords who have undertaken works have successfully let space.

Looking ahead, as best-in-class supply continues to dwindle, we will see more such examples, with those making the jump undoubtedly capitalising on the lack of top quality stock.

Dan Smith is head of office at Savills in Aberdeen.


Conversation