The controversy over Aberdeen’s Union Terrace garden plan has not dented confidence in the city as high oil prices maintain the city’s prospects for the future. The local plebiscite, which divided the city over the £140m garden plan, supported by Wood Group chairman Sir Ian Wood, has made headlines because of the bitterness of the campaign, but it has won public approval.
The Aberdeen office market activity review for 2011 revealed that annual office take-up was among the highest in the UK at 773,175sq ft, doubling the city’s figures for 2010 and surpassing Manchester, Liverpool, Edinburgh and Glasgow.
The report shows that Aberdeen commanded the highest prime headline office rent out of the UK’s 11 key regional markets outside the South East.
A new record headline rent of £31.50 per sq ft was set following McGrigors’ lease of Queen’s House and this is expected to rise further in 2012.
Katherine Monro, partner at Knight Frank’s Aberdeen office, attributes the increased demand in property to the current buoyancy in the North Sea oil and gas sector.
She said: “This record performance in Aberdeen is inextricably linked with the current climate in the oil and gas industry.
High oil prices have prompted investment and business expansion and are consequently, fuelling office demand.
In addition, the news of £10bn investment in the Clair Ridge oil fields to the west of Shetland have boosted long term commercial property prospects for the region.” Almost 75% of 2011 take-up happened during the first half of the year, with several large deals exceeding 50,000sq ft.
Notable transactions include Wood Group and Centrica’s 66,584sq ft and 58,339sq ft leases at iQ on Justice Mill Lane and AMEC’s sub-lease of 94,000sq ft from Shell UK Ltd at Seafield House, Hill of Rubislaw.
“Occupier market conditions are expected to remain strong, due to a number of major enquiries from the energy sector that are outstanding.
Evidence also suggests that prime headline rents will achieve another record high, reflecting the shortage of Grade A space in Aberdeen city centre,” added Munro.