Commercial Property News

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Tuesday, March 13, 2024

Feast and famine in Aberdeen according to Graham + Sibbald

The explosion of occupier demand for office and industrial accommodation during 2006 is set to continue throughout 2007 and beyond, if the predictions of a battery of property industry reports is to be believed. And why shouldn't it?

The increase in oil to a spike of $70 in mid 2006 and a predicted medium term plateau of $45 (or more if certain predictions are correct) has ensured that confidence within the oil and gas sector and all those industries which feed off it has generated a level of optimism and economic activity for Aberdeen and area not seen since the early 1980s.

This in turn has created a commercial property and land supply problem. Vacant property has been disappearing to new occupiers like snow off a dyke; even ones that were tired and jaded and looking the worse for over 20 years wear and tear, have found new occupants. There can be no doubt that 2006 was a period of opportunity for occupiers and developers with foresight, because last year they acquired most of the available prime business space land in the Aberdeen area. Those occupiers who managed to acquire then, will now count themselves fortunate and those that didn't may rue the day. Developers currently sitting with land have more projects under discussion than their land holdings can satisfy and those intending to build for let or sale on completion are now in a race to finish their schemes in order to be amongst the first to the market, and cash in on the combination of burgeoning demand and city-wide lack of quality accommodation.

Lack of locational choice and property options is now a major problem for business space users in the Aberdeen area. Land values have surged upwards with the last acres sold at Westhill achieving 500,000 per acre, double the asking price of a year earlier, with the final 6 acres of the current phase now on the market at a reputed asking price of 800,000 per acre.

Due to the level of demand for offices, business park land transactions have been reflecting office values and developers now require office occupiers to justify the on-cost. This is creating major problems for general industrial users who now cannot find suitable sites in the Aberdeen area. A recent poll of proposed and existing business park developments in Aberdeen shows that all schemes are designated for office use and coupled with sites in town, a total of over 800,000 sqft. of office accommodation will become available from late 2007 through 2008. This will undoubtedly be quickly taken up by a market hungry for new office accommodation but be of little use to the rest of the market.

So what are the immediate prospects for satisfying the needs of the ordinary industrial occupier? Few and far between is the answer. Their aspirations are being frustrated by current land prices and the simple economics of development. This is already of concern to the City and Shire Councils who are aware of the problem, but their concern will be of little consolation to businesses with a current need for a new workshop, warehouse or yard and can't find a suitable site anywhere.

The solution is clearly to facilitate a process whereby zoned land is fast-tracked to the market alleviating the current land short fall. The good news is that there is plenty of zoned land in the pipeline, but with planning processes and infrastructure constraints the main reasons for delay, it remains to be seen whether the process of coming to the market can be speeded up.

It looks like 2007 will be a feast for developers and office users who'll be spoilt for choice; and famine for industrial occupiers who will have to tighten their belts and hope for better fare in 2008.