There are definite reasons for optimism in the year ahead. Demand for office and industrial space continues to improve helped by a sustained higher price for oil and gas and improving confidence in the outlook for the energy sector generally with the region also benefiting from the start of a transition to renewables.
In the city centre, the new Grace A office developments from the last development cycle (Marischal Square, The Capital, Silver Fin) are essentially full so there is a shortage of Grade A space. Office space that is available is typically of poorer quality and in need of investment.
The change to the legislation that came into effect on April 1, 2023 in Aberdeen has had an impact and generated activity. The reduction in empty building rates relief for listed buildings has necessitated that landlords with ageing assets consider the future use of their buildings now that a rates burden is being incurred. The question facing landlords is what will it take to modernise these older buildings to meet the future demand for modern office space, and what sort of return might be expected?
Notable current examples we are part of include 3-5 Albyn Place, acquired by Surplus Property Solutions and undergoing a significant refurbishment and upgrade, and Caledonia House on Union Street, acquired by Standard Real Estate. Both these city centre office buildings will be redesigned and refurbished to offer high-spec, highly desirable, Grace A space in 2024.
Generally speaking, it has been our experience that those landlords who have had the resources and courage to invest in upgrading older stock, assuming the product is right, have done well in attracting new occupiers. Given the current market conditions, we will see more of this activity in 2024.
In the year ahead, we will also see a number of older, former office buildings repurposed through change of use. A number of new student accommodation schemes will come to market in 2024 with the conversion of older office stock to modern student accommodation. The investment in city centre projects of this nature combined with the upgrading of older office stock will result in a further increase in city centre footfall which is all good news for the city.
It is a similar picture in the industrial market. Whilst there is still significant void space, there is a distinct lack of prime industrial space available. As with the office market, available older stock is typically of poorer quality and in need of investment and improvement. Where the refurbishment of existing buildings will be a priority, industrial space that is not considered economically viable for the future is likely to be demolished in order to avoid the burden of empty building rates expenses.
Space Solutions has been creating award-winning workspaces since 1997. The business continues to develop the concept of workplace consultancy and has worked with major public & private organisations across the UK. The business has locations in Aberdeen, Edinburgh, Glasgow, Dundee Livingston and London and employs 198 members of staff.