CoStar Analysis: The changing face of Glasgow’s office market

By Grant Lonsdale - Monday, October 09, 2017 14:45

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Glasgow’s office vacancy rate has come down markedly in recent quarters amid a pause in speculative development and numerous conversions of office buildings to alternative uses. But how have the city’s stock levels fared over the longer term, and which submarkets have been most impacted?

The Glasgow office market has increased in size by around 6% over the last decade driven in part by several large regeneration projects, which have helped to offset the more recent trend of redundant office buildings being demolished or converted to alternative uses.

The Clyde Gateway submarket has expanded more than any other over the last 10 years (see chart above). Its total office stock has increased by 45% since its inception, with a programme of substantial infrastructure investment, enabled in part by the 2014 Commonwealth Games, helping to boost its attractiveness to occupiers. Indeed, Police Scotland moved its headquarters from the city centre to the area in 2015. Speculative construction arrived in the form of One Rutherglen Links (34,000 SF) and The Albus (21,000 SF) in 2014, and the submarket will be home to Magenta, the largest proposed office development with planning consent in Scotland (1.2 million SF). Pacific Quay, another submarket to benefit from significant regeneration in recent years, has 36% more office floor space than it did in 2008, with the Clyde Waterfront partnership facilitating the delivery of The Hub (55,000 sq ft) and Watermark Business Park (60,000 sq ft). North Lanarkshire, too, has expanded by around one-third in the last decade, though most of its growth came in the form of Maxim Office Park at Eurocentral (750,000 sq ft), a speculative business park delivered by Tritax in 2009. Despite recent lettings to Balfour Beatty (43,600 SF) and TC BioPharm (11,300 sq ft), many of the park’s buildings remain vacant to this date.

In contrast, several other submarkets have seen a significant reduction in stock levels over the last decade. For example, Inverclyde has lost around a fifth of its office stock, following the residential redevelopment of the old Navy Buildings (90,000 sq ft), and the ongoing demolition of IBM’s former Greenock site. And of all central Glasgow’s submarkets, the Park Area has shrunk by the most (10%) over the last 10 years. The submarket contains some of the most sought-after prime residential addresses in the city and is close to Glasgow University. As a result, numerous office buildings have been lost to student accommodation, hotel, and residential uses over the years. Indeed, two of Park Area’s largest office buildings (1–9 Clifton Place and 20 North Claremont Street) were converted to student accommodation in 2015, causing the submarket’s vacancy rate to fall sharply that year.

So what might the future hold? Large completions are likely to be confined to the City Core, in the short-term at least, with Morgan Stanley’s new headquarters (the only office building under construction in central Glasgow) due to deliver soon. The Government Property Unit is rumoured to have chosen Atlantic Square for the first phase of its requirement, potentially kick-starting that 300,000 sq ft scheme. Elsewhere, Clyde Gateway looks set to continue its growth trajectory: Red Tree Shawfield, a 40,000 sq ft office building aimed at SMEs, is expected to complete by summer 2018. It will also be interesting to see how developers respond to the recently announced rates reforms following the Barclay Review, meaning building owners will not be liable for business rates until a tenant moves in.

To see CoStar's latest Glasgow office report click here.

glonsdale@costar.co.uk

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