Commercial property: Granite City becoming two-tier market, says Savills

Aberdeen is seeing the emergence of a two-tier commercial property market, according to Savills.

Rents and terms are holding up well for “best-in-class” buildings, it said.

But “functionally or locationally obsolete” properties are struggling, the firm added.

Changing times for energy firms

Claire Herriot, associate director at Savills in Aberdeen, said: “We continue to see an increase in significant transactions… related to alternative sectors.

“While the majority of take-up in both the office and industrial market can be attributed to traditional energy companies who operate in oil and gas, many of these relocations support their wider ambitions to move into renewables.”

Wind and hydrogen projects, as well as the potential for carbon capture and storage offer Aberdeen the chance to be a key player in the energy transition, Ms Herriot said.

She added: “The property market plays a crucial role in unlocking these opportunities.

“The immediate challenge is the severe lack of supply of high quality stock.

“We will likely see rents increase for good quality secondhand space across industrials and offices in the absence of any new-build product.”

New development ‘unviable’

There is a growing urgency for speculative development in the market, Ms Heriot said, adding: “High build, labour and finance costs still remain an issue – making new development unviable in a lot of cases.

“If we do see any new-build development, rents will need to be well ahead of where they were at the peak of the market back in 2013-2014 and long term lease commitments will be required, unless we see a reduction in costs.”

We will likely see rents increase for good quality secondhand space across industrials and offices in the absence of any new-build product.”

Claire Herriot, Savills

Meanwhile Savills said it accounted for 385,000sq ft of office lettings in Aberdeen last year, a 95% uplift on 2021 levels and in line with the five year average of 380,000sq ft.

“A further 100,000sq ft of office space sat under offer as we entered 2023,” it added.

Savills was also busy on the industrial front in 2022, recording total take-up of 926,000sq ft – up by 35% on the year before and well ahead of the five year average of 620,000sq ft.

Deal highlights

Key transactions for Savills’ team in and around Aberdeen included ETZ acquiring a 47,000sq ft facility on Hareness Road for its energy transition zone plans.

Savills was also involved in the biggest industrial deal of last year, the letting of 65,000sq ft at the Wallace Facility at Badentoy, Portlethen, to waste services firm Biffa.