Energy giant Shell’s move to the Silver Fin building in the centre of Aberdeen has been highlighted as a sign of growing momentum across office rentals in the coming months, as workers return to their desks and leases expire.
According to property firm Colliers, high quality space and environmental, social and governance (ESG) commitments will be the key criteria as companies consider moving to new locations.
The company is predicting the year is “set to end on a high,” despite its latest snapshot of the Scottish commercial property market showing a drop in transactions across all sectors, except retail warehouses, in the third quarter of 2021.
Colliers said a resurgence of Covid-19 cases, and school summer holidays had been among the factors that suppressed deals activity, with the total invested falling from £600m in the second quarter to £360 in the most recent period.
The figure was 33% above 2020 levels, but below the corresponding five-year average.
Offices and retail accounted for the largest overall shares by value, with £170 transacted in each segment.
Oliver Kolodseike, director and head of economic research, at Colliers, said: “In line with the rest of the UK, quarterly volumes in Scotland were lower than Q2.
“However, we should see a pick-up during the final quarter of the year and easily beat last year’s total of £1.4billion.”
He continued: “There is still a large amount of pent-up savings across Scotland and retailers will be hoping that some of this will be spent on the high street.
“However, market conditions remain challenging as consumer behaviour continues to change. Rents will continue to fall, although rates of decline have slowed recently.
“With more workers returning to offices and leases expiring, we are likely to see a growing momentum across offices in the coming months, with high quality space and ESG commitments key criteria.”
Shell’s planned move from its current North Sea base, in Tullos, to Union Street was announced last month.
The company is taking 71,000 sq ft at the Silver Fin building, giving space for around 1,000 staff.
A number of other property deals in Aberdeen in the third quarter were highlighted in Colliers’ report.
They included LXi’s £4m acquisition of Tullos Industrial Estate and the £3m sale of the 12,000 sq ft Sainsbury’s store on North Deeside Road to a private investor.
An asset in Aberdeen was part of a seven-asset portfolio, including ones in Lanark and Bellshill, bought by Investcorp for £33m.
Alpha Pharmaceuticals bought a 40,600 sq ft office building in Aberdeen’s Ruby Lane for £1m.
In Edinburgh during the quarter there were four major office transactions, totalling just over £100m, while in Glasgow there were a further four, amounting to £67m.
Patrick Ford, national capital markets director at Colliers in Glasgow, said: “There are clear signs of activity picking up with a number of high-profile offices in Edinburgh and Glasgow currently on the market or being prepared for sale.
“We expect record-volumes to be recorded in Q4. Interest continues unabated from overseas investors targeting ‘core plus and value add’ offices in both cities, as well as key European and US investors targeting prime assets in the office and logistics segments.
“These are all set against the backdrop of international travel restrictions easing.”
He added: “Sustainability has never been in such sharp focus in Scotland and with Glasgow hosting COP 26 the importance of buildings ESG credentials across all sectors is becoming an increasingly dominate narrative in the investment market.”