Many businesses are keen to locate to Edinburgh, but they are hampered by a lack of office space in the Scottish capital, reports The Scotsman this month.
There is high demand for office space in Edinburgh, but there is little in the way of new development to fulfil demand.
Cameron Stott, writing for The Scotsman, has blamed the situation on the lack of available finance. He says that major UK clearing banks have reduced lending to the office sector since the financial crisis of 2008. Some specialist lenders are prepared to provide commercial mortgages for office developments and conversions, but Stott says that many lenders prefer what they regard as safer investments, including residential property, hotels and students housing,
New office tenants are used to rent-free incentive periods, and this may have put off some investors who want to see returns on their investments much more quickly.
Growth in the value of residential property has exceeded that of the commercial sector. However, commercial rents are expected to grow by 2.5% annually until 2021.
Only three new office developments are due to be completed within the next three years. These include Semple Street and the Mint Building, which are due for completion early 2019.
The lack of new development could drive refurbishment activity to cater for tenants who require high class office accommodation. Stott feels that the lack of new development is slowing down the growth of both Edinburgh and Glasgow. He wants to see “new development come forward to spur inward investment.”