Lack of office space boosts Glasgow’s demand for ‘high quality’ renovations
RENOVATION rents could exceed new build rents in Glasgow next year, with the city at the ‘tipping point’ due to a lack of new office developments.
This is Savills’ view, due to less than a year’s supply of new office space (100,000 sq ft) in the city and no other developments available for occupancy until 2025 .
The latest report from Savills says Glasgow landlords with “high quality” renovations have the opportunity to capture “significant” rental growth in 2023.
Comparing current Grade A new build rents (£35.25) to best-in-class refurbished space (£30), Savills found that Glasgow has one of the biggest rental gaps at around 15%, compared to around 10% in other major 6 regional markets of Edinburgh, Birmingham, Bristol, Manchester and Leeds.
Meanwhile, demand for “best-in-class” space prevails, with nearly 60% of all office rentals in 2021 (303,077 square feet) on Class A housing.
David Cobban, head of Savills Glasgow and head of the office agency team, said: “Glasgow has a perfect marriage of occupiers demanding the best design and little supply available, with broader ESG requirements that encourage developers to explore renovation options, rather than building new. The significant opportunity to capture rental growth could trigger welcome investment in our existing municipal offices and breathe new life into tired buildings that occupy solid locations.
“Rebuilds are both faster to deliver and often more economical. Evidence suggests that occupiers are willing to pay higher rents for better space and a shifting weight of demand towards “best in class”. Additionally, given some of the sustainability issues associated with spiraling construction costs, renovations will play an increasingly vital role.
The Savills report explores the benefits of repurposing existing office stock in Glasgow, which the company says can typically save between 50-70% of the embodied carbon associated with new build.
Nadeem Khan, Principal of Savills Engineering and Design Consultancy, working closely with Savills Earth, added: “Newly constructed buildings are of course more energy efficient, given the ability to design for net zero emissions. at the concept stage, but it is estimated that around 80% of the buildings that will be standing in 2045 have already been built, so a major priority is to decarbonise our existing stock.