A SHORTAGE of office property in the city is set to push rents up for the first time in five years, a new report has revealed.
An increase in the number of deals for top-quality business accommodation in Edinburgh, combined with a shortage of new office buildings, has seen the existing supply of properties dwindle, which will send rents up to 3.6 per cent higher, according t
o commercial property expert Jones Lang LaSalle.
In its Edinburgh City Report, the firm said it expected there to be a "significant uplift" in occupier take-up in Edinburgh during 2007, which it said would boost rental growth for the first time since 2002.
For the first time in 15 years, 2006 was the only period when no new speculative developments were completed in Edinburgh - and only one new property, the redevelopment of Westport House in Edinburgh's Exchange district, is set for completion in 2008.
Alan Robertson, managing director of Jones Lang LaSalle Scotland, said he expected top rents to rise by around £1 per square foot to £29 during 2007.
He said: "Office rents have been pretty flat in Edinburgh for the past six years, which has been partly because of a downturn for demand in the early years.
The market was also affected by big companies choosing to do their own thing when it came to new buildings - such as RBS - rather than taking on speculative developments.
"In the late 1990s, there was a lot of building going on as developers jumped on the bandwagon and created new offices to keep up with demand, but as demand dropped off, we saw the fallout from that in the form of an excess of developments."
He added: "Edinburgh tends to follow London, where rents have been increasing in recent months and it would be very typical if Edinburgh was to follow suit.
"We are definitely seeing a lot more activity in the rental market at the moment."
He said that although a few city centre offices, such as the iconic Waverley Gate on Waterloo Place, were still available, companies looking for new premises did not have much choice.
He added: "I think we will definitely see movement on Waverley Gate this year. We have been doing a lot more viewings there than usual."
Although occupier take-up was 12 per cent down on 2005, almost a third of the 63,132 sq m of office space was taken in the fourth quarter of the year, the report said.
A total of 187 deals were completed in 2006, when 12 of the properties were 1000 sq m or bigger - compared with just eight in 2005.
In 2007, a total of four new office developments, including one at Edinburgh Quay and another at Number one Quartermile Square, are set to be completed in the city centre, while a further two, including the EHQ offices at South Gyle, are also due to be finished.
The full article contains 500 words and appears in Edinburgh Evening News newspaper.
