Improvement in oil price and continued stability in the oil and gas market sees office take-up in Aberdeen total 388,227 sq ft (36,070 sq m) in 2018, according to the latest research from Savills. The firm reports a 40% increase in the number of office lettings seen in 2018 compared to the year previously (94 lettings compared to 68 in 2017) and close to double the number of deals done in 2015, the year immediately following the oil crash.
Availability in Aberdeen currently stands at 2.7 million sq ft, says Savills, of which 940,000 sq ft (87,326 sq m) is Grade A. The firm believes this number will reduce through-out 2019 as market supply begins to tighten. The top rent in 2018 stands at £32.50 per sq ft (£350 per sq m) which was achieved in three separate deals at The Silver Fin Building.
Dan Smith, head of Savills Aberdeen and director in the office agency team, comments: “An increase in the number of deals demonstrates strengthening levels of stability in Aberdeen’s office market with a greater number of smaller deals indicating a market less susceptible to fluctuation from large individual lettings. Despite a divergence of sectors following the oil crash, Aberdeen’s economic reliance on oil and gas industries remains and therefore when oil prices increase, take-up and investment volumes also improve. We consequently expect Aberdeen to see significantly higher levels of office take-up during 2019.”
Looking towards 2019, Savills says the year will be shaped by an ongoing ‘flight to quality’ amongst occupiers in the city. The change of use of functionally or economically obsolete buildings - driven by vacant rates liabilities and continually evolving regulations in relation to energy performance – will further decrease supply levels.
Savills says Aberdeen City Council’s City Living Plan, which aims to attract 3,000 more residential occupiers to the city centre over the next few years, will also influence the office market. As too will the Aberdeen Western Peripheral Route, which opened in December, and the South Harbour extension, both of which, the firm explains, will open up new pockets in the city. Finally the continuation of City Fibre’s roll out of a fibre network, will benefit Aberdeen’s office market by making the city one of the “best connected cities in the UK by 2021”.
Key deals in 2018 include Aberdeen Journals, NHS, Tenaris and Spaces all committing to space at Marischal Square and CATS Management, Barclays and Verus Petroleum taking space at The Silver Fin Building.
By comparison, Savills figures show take-up for the whole of 2017 totalled over 400,000 sq ft (37,160 sq m) with the city’s two largest deals accounting for almost 50% of annual take-up.