International property giant Savills says Aberdeen’s office market is likely to stay quiet until “the oil and gas sector is feeling more confident”.
But, in its latest Scottish Office Market report, Savills also said expectations in the Granite City were now more positive than six months ago.
Savills said “the story” on the supply-side in Edinburgh and Glasgow was still one of falling availability, particularly of Grade A space.
In Aberdeen, a dramatic increase in the amount of office space being marketed in recent years continued during the first quarter of 2016, with a total of 19.4million sq ft available, it added.
But in common with Edinburgh and Glasgow, less than half of the vacant office space in Aberdeen is at the top, Grade A, end of the market, the report said.
Savills, which operates through an international network of more than 700 offices and associates around the world, added: “The Aberdeen office market, while by no means out for the count, is likely to stay quiet until the oil and gas sector is feeling more confident.
“Market expectations . . . are more positive than they were six months ago, and that there will continue to be some lease event driven tenant demand in the city, particularly if businesses perceive that the next two years might be a good moment to secure high quality space on competitive terms.”
The report also said a lack of suitable office space in Scotland’s key cities, combined with rising rents, was leading to more companies looking outside city centres.
According to Savills, total take-up of office space outside the central business areas of Scotland’s three biggest cities – Glasgow, Edinburgh and Aberdeen – was 4% higher in the first quarter of 2016 than in the previou.
The firm said this trend was likely to increase as occupiers continue to be attracted by lower prices on offer in out-of-town locations, where in some cases there can be a 50% discount on the £30 per sq ft prime rents paid in city centres.
Savills suggested some of Scotland’s out-of-town sites were on the “cusp” of a resurgence in popularity as businesses try to save money on office rents.
Simpson Buglass, who heads up the firm’s office in Aberdeen, said this had been the trend in Aberdeen for some time before the oil price slump.
But a new pattern of take-up is developing in the Granite City as the market adjusts to the new economic environment, he added.
Savills said Scottish office investment volumes remained healthy, with just over £300million transacted in Aberdeen, Edinburgh and Glasgow in the year to date despite UK institutional investors “being quiet in the run-up to the EU referendum”.
Nick Penny, director in the investment team and head of Savills Scotland, added: “The national trends do seem to point to non-domestic investors being less concerned about the outcome of the EU referendum, and in some cases actually seeing it as a buying opportunity.
“Scottish office investments still look cheap in comparison to the English cities. This, and the solid rental growth story, will continue to attract investor interest in Scotland’s prime office markets.”