Economic data has been more positive than expected post Brexit, with the economy withstanding the shock much better than anticipated for the time being, according to Andy Cunningham, Partner, Head of Business Space Agency – Glasgow.
The leasing market received a shot in the arm in Q3 2016, with international spirits company Edrington Group securing 29,890 sq ft at 100 Queen Street.
Nevertheless, Cunningham says the underlying trend has been subdued, albeit this coincided with the summer lull. Deals in hand prior to the referendum are still working their way through, albeit very slowly in many cases.
Expectations are that the fallout will start to impact on the economy in 2017 predicts Cunningham, with consumer prices anticipated to rise and business investment slowing.
2016 full year leasing volumes are anticipated to be around 800,000 sq ft compared to a long term average of 567,237 sq ft.
Cunningham said: “2017 is widely expected to be a difficult year for Glasgow office leasing due to a lack of supply. With no speculative development, prime rents will start to come under pressure.”
TAKE-UP Q3 2016
The vote to leave the EU coincided with the summer lull and as result inertia was the underlying trend in the leasing market. While the market experienced a strong July, with deals in negotiation pre Brexit having the momentum to take them over the line, there was a marked slowdown in leasing volumes in August and September.
Cushman & Wakefield estimate that leasing volumes stood at 97,085 sq ft in Q3, which brings the year to date total to 703,136 sq ft. This was 2% down on the same point in 2015 however 72% above the 5 year Q1-Q3 average.
The Edrington Group securing 28,890 sq ft during construction at 100 Queen Street for their global HQ was a much needed vote of confidence, while Canadian IT Services company CGI’s commitment to Glasgow following their agreement to lease 9,374 sq ft at Inovo suggests a more solid longer term position.
Central Glasgow supply stood at 1.6 million sq ft at the end of September, which equated to a vacancy rate of around 11.7%. This was slightly up on the previous quarter, primarily as a number of new schemes are approaching completion bringing a welcome boost to supply levels.
Central Glasgow supply of Grade A space stood at 233,051 sq ft at the end of September, which equated to a vacancy rate of 1.7%. Supply is now well below the 10 year average of 320,000 sq ft.
For the sixth consecutive quarter, Central Glasgow has no speculative space under construction. A lack of speculative funding in Glasgow is the main reason however, this can also be explained due to the uncertainty surrounding Indyref 2 and Brexit.
Cunningham added: “The biggest uncertainty regarding future pipeline is likely to be in respect of schemes due for delivery in 2019 plus.”
For further information contact Andy Cunningham, Cushman & Wakefield on 0141 223 8790 or firstname.lastname@example.org