Aberdeen was the only UK city to see double digit rental growth in Q1 08, with rents rising by 14% to £28.00 per sq ft (Q4 07: £24.50 per sq ft); and is expected to see a further 7% increase by the end of 2008 to break the £30.00 per sq ft mark. This strong rental growth is due to the continued buoyancy of the city's office occupational market.
Edinburgh and Glasgow are also both forecast to encounter a rise in prime office rents of 5% to £30 per sq ft (Q4 07: £28.50) and 4 per cent to £28.50 (Q4 07: £27.50) respectively.
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In contrast to the resilience of the occupational sector, Scotland has witnessed an outward shift in prime yields as a result of the worldwide credit crunch and the increased pressures on the debt market.
Aberdeen and Glasgow had the highest yield shift of 50 basis points while Edinburgh saw a 35 basis points increase ending at 5.85% (Q4 07: 5.50 per cent).
Drew Oswald, Managing Partner, Knight Frank said: "Scotland's occupational market performed well throughout 2007 and this year looks set to continue this trend as Aberdeen, Edinburgh and Glasgow are all forecast to experience further increases in prime office rents. Once again Aberdeen has come out on top with a lack of Grade A stock in the city centre driving a healthy rental market."
Claire Higgins, head of commercial research, Knight Frank said: "Although prime yields have continued to move out across Scotland and the rest of the UK, the rate of movement has lessened, indicating that the office investment market may stabilise in the short to medium term.
"However, this remains dependent on investor confidence and the underlying economy, while concerns surrounding restrictions on financing will continue to influence performance."
(GK/JM)
