Office space is set to remain empty as the downturn bites

SOME of the Capital's biggest office developments are set to remain empty as demand continues to slow, property experts warned today.

Agents say deals and enquiries from companies have dried up completely since mid-September, and they forecast the situation will be even worse this year.

The formal completion of the Lloyds TSB takeover of HBOS is also set to lead to more offices lying empty in the city as the new group scales back its operations.

With several major new city centre office developments due to become available during this year, it is expected that city offices will struggle to attract companies. Among the buildings expected to suffer is eight-storey Waverley Gate, the city's former general post office. It has been close to empty for nearly four years since developer Castlemore completed its £100 million refurbishment.

A report on the Edinburgh office market by property firm GVA Grimley showed that take-up for the whole of 2008 was unlikely to exceed 700,000 sq ft – and is set to drop further this year.

Toby Withall, a director in the firm's Edinburgh office, said:

"Edinburgh has been badly hit as it is so dependent on financial services. Because that sector has suffered so badly the impact has rippled down to almost every sector and that makes Edinburgh suffer worst."

Despite Microsoft moving its Scottish headquarters to Waverley Gate last year, it takes up only a small area of two of the floors and there is still 196,000 sq ft of space available – 35 per cent of all grade A space in the city.

Despite the amount of time it has lain largely empty, Nigel Crump, a spokesman for Waverley Gate developer Castlemore, said: "We would prefer to have the building let than empty, because it does cost a lot of money to run.

He added: "Right now, I am not depressed about it. However, if we are in the same position a year from now I probably will be."

Stewart Taylor, a director at CB Richard Ellis in Edinburgh, said: "If Waverley Gate wants to secure occupiers in 2009, they will have to undercut other schemes. It's not a building occupiers fall in love with."

Ben Reed, a director at the Waverley Gate leasing agent Jones Lang LaSalle, said: "We are on people's shortlists but it is a symptom of the conditions that decisions are taking a lot longer."