Call Soho Office Space

0208 090 3161



The Office Space Market in Aberdeen

Get a Quote

For several years, the office property market in Aberdeen has been outperforming most of the UK's key markets. Ongoing growth in the oil and gas sector, along with comprehensive tax relief schemes, have contributed to making Aberdeen one of the most buoyant and in-demand office markets in the country.


Overview of the Aberdeen office market - General Trends

The office market in Aberdeen is characterised by high take-up rates, above-average rental values, and a large number of long-term leases and pre-let agreements.

According to researchers at Knight Frank, during 2014 the local office market saw record take-up levels in excess of 1 million square feet. At the end of 2015, Grade A availability was just under 414,000 square feet, and only 5 per cent of the city's total Grade A office stock was ready to move in. Since late 2014, there has been an evident surge in the number of speculative developments around the city, in particular around Marischal Square and Union Street. These are in place to tackle the increasing shortages of prime office space within Aberdeen city centre. The market is also dominated by an increasing number of relocations, which have caused a dramatic decline in the availability of Grade B space.

Pre-lets and long-term leases are the most common type of agreement in the city's office property market. This trend has also contributed to keeping oversupply in check.

As for the office investment market, the most recent trends have also been positive, since during 2014 alone the city attracted record levels of investment in excess of £640 million. According to Knight Frank, in late 2015 prime yields for office properties in Aberdeen averaged 6.25 per cent.


Areas

The most expensive office properties in Aberdeen are clustered around the AB12 and AB15 postcodes, whereas the lowest per-square-feet costs belong to out-of-town locations, such as the Aberdeen International Business Park (in Dyce), where they range between £23-£25 / square foot; Altens (where office space can be found for under £20 / square foot); and Westhill, where average rental values are in the region of £22 / square foot.


Occupiers

The energy sector is the key occupier in the Aberdeen office market. According to CBRE, this sector has been behind 67 per cent of the city's total take-up rates since 2009. The business services sector is also a key occupier. In particular, legal and accountancy firms have recently been taking up older office space in the city centre. Moreover, research published by Knight Frank provided a breakdown of take-up by sector, and revealed that energy and utilities forms are behind the majority of transactions, followed by professional services, construction and engineering, charities, the public sector, pharma, health care, and manufacturing.


Rental Values

The general trend in Aberdeen stands in stark contrast with the prevailing trends in the Scottish and UK commercial property markets. On average, since 2009, capital values for offices across the city increased by more than 6 per cent every year. As of January 2016 average rents for office space ranged between £28 / square foot (for out of town offices) and £30 / square foot for city centre offices, reaching £32 for headline rents. Pre-lets in out-of-town business parks average £24 to £27 / square foot.

In addition, during 2015 serviced office rates in Aberdeen became the UK's second highest, reaching average values of £598 per workstation following a year-on-year increase of nearly 20 per cent. Only serviced offices in London are more costly, at approximately £615 per workstation.


Outlook & Future Trends

The drop in oil prices has already begun to be felt in the city's office property market, and is expected to have repercussions for both landlords and occupiers. Researchers have predicted that there will be a slowdown with regards to take-up rates, and that the average take-up levels of the past few years will not be repeated in the near future. Rental values are expected to reach a plateau at around £34 / square foot.

However, the drop in oil prices is most likely to benefit occupiers, as average rental values are expected to decline. In addition, landlords are more likely to offer rent-free periods on long-term leases (especially those between 15 and 20 years) in an effort to secure transactions.

Overall, the Aberdeen office market is expected to weather the storm and perform well, even if its performance is not at the exceptionally high levels that have characterised it during the past few years.