Companies in Aberdeen are facing a “major property problem” as stock shortages frustrate growth prospects, a leading property agency has warned.
Mark Jones, director at DTZ, said the improving economic prospects for many firms were set to be thwarted by lagging commercial property development which could see occupiers hit my massive rent increases.
He said: “Much to the relief of George Osborne and industry alike, the economy is once again moving forward. Sentiment has noticeably improved in the property sector but is this good news for the occupier?”
He said the problem was one faced by all of “corporate Scotland” but was particularly acute in Aberdeen.
“Stock shortages are becoming evident both to office and industrial sectors within Scotland’s key cities. This has already been seen in Aberdeen where the city is effectively at 100% occupation and rent levels have risen by over 30% within the past five years. Availability is scarce and frustrating the expansion of its oil and gas sector, and those servicing it,” said Mr Jones.
DTZ is predicting “serious shortfalls” of both Grade A and fully refurbished Grade B offices in city centres and good quality small to medium-sized industrial units around key urban areas.
“Over the course of 2014, the market is predicted to move significantly in landlords’ favour. Incentives will diminish and rents will rise. Occupiers should be worried, the swing will not be gentle and with a spike in lease breaks between 2014 and 2016, competition between occupiers for limited amounts of available space could lead to a step change in rents. When will this happen? Sometime between 2015 and 2017 is our best estimate but it is more likely to be sooner rather than later,” Mr Jones warned.
“The effect of increasing demand and diminishing stock is predicted to have a widespread impact. With no security of tenure in Scotland, occupiers seeking short-term lease extensions may find themselves ransomed on rent, term or both. Rent reviews will result in increases on property outgoings. A lack of relocation options will impact business planning and building obsolescence will need to be considered,” he added.