An overview of the commercial property market in Edinburgh

Being Scotland's capital and one of the United Kingdom's most economically active cities, Edinburgh has a thriving commercial property market. The city's excellent transport links make of Edinburgh a popular location for business people and investors alike, and Edinburgh's commercial space is dominated by firms in sectors like finance, business services, and manufacturing.

According to a report published in, Edinburgh's commercial property market has been slowly moving towards stability since 2009. The value of investments made on the local commercial property market has decreased sharply from a record high of £1.3 million per transaction in 2006 to average values of £400,000 in 2010. Since 2010, the decline rates have become more stable despite a generalised slowdown in average investment values.

The most sought-after areas by occupiers and investors include:

Edinburgh's city centre - This area comprises the city's Old Town, the West End, New Town, and Haymarket. Each of these areas tend to attract a particular type of occupier, with business services being concentrated around New Town, and leisure and entertainment in the Old Town, the West End, and Haymarket.

Leith - Leith has an increasing number of serviced offices, flexispace, and business centres that combine a convenient location with prices that are lower than in the city centre.

The Exchange - The Exchange is considered Edinburgh's business district and as such, it offers mainly top-class office space from 524 square feet upwards.

Edinburgh Quay / Fountainbridge - This award-winning urban development is a premier location featuring 260,000 square feet of retail space and grade A office properties.

Hermiston Gait - Hermiston Gait is a retail park offering industrial unit space, warehouses, and retail space floor just off the M8.

Office space in Edinburgh

In terms of office space availability, supply clearly outweighs demand in the Edinburgh market. Annual take-up levels are in the region of 200,000 square feet, while the total office space available in the city exceeds the 650,000 square feet mark.

Forecasts predict that the above trend will remain until 2013, when it is likely that the supply-demand ratio will become more balanced as new developments become available. It is also expected that between 2012-2015, the office property market in Edinburgh will experience the highest growth levels of the three main commercial property areas (retail, industrial, and office). According to the Investment Property Databank, annual rental growth levels in this sector may reach 7 per cent by 2015, mainly due to increased demand for space from companies in the business services field.

Another interesting trend that has been observed during the first quarter of 2012 is the preference for longer lease terms, as an increasing number of companies now choose leases of nine months instead of the previous average of six months.

In terms of pricing, during the first few months of 2012 office space costs in Edinburgh fell by more than 35 per cent when compared to the same period during 2011. According to a report by Office Broker, the current cost per workstation in Edinburgh is £216, whereas the previous year it was set at £338. Considering that the current national average for office space stands at £295, it can be affirmed that office space in Edinburgh represents great value to businesses and investors.

Retail space in Edinburgh

As in the case of other British cities, the retail sector in Edinburgh has been hit by the financial crisis, resulting in diminished consumer activity and a reduced demand for retail space. Still, the Edinburgh retail property market is expected to perform better than the rest of UK cities (with the exception of London), as forecasts predict an annual rental growth level of 1.5 per cent as opposed to the national average levels, which have been set at 0.5 per cent.

Researchers at the Investment Property Databank believe that in the medium term, the retail property market in Edinburgh will recover from its current slowdown trend, particularly when it comes to high-end retail property and to sectors like supermarkets, fashion, and discount stores.

Industrial space in Edinburgh

There have been a number of speculative developments in Edinburgh since the end of 2010. The majority of these are to be occupied by businesses in sectors like manufacturing, construction, and transport. As these sectors are expected to remain strong in the medium term, researchers have predicted that the industrial property market will grow at rates that range between 1.5 and 2.3 per cent during the period leading up to 2015. As in the case of office space, this figure is higher than the national average, which has been forecast at 1.2 per cent.

Current average costs for industrial property stand at £7 per square feet, and the highest demand is related to small and medium sized properties of 20,000 square feet and under.