Aberdeen - A Matter of Perception
The city is filled with people who have a quiet determination to get the job done - and that's no bad thing..
THE citizens of Aberdeen and the North East of Scotland are used to being on the receiving end of Central Belt humour evolving around three mains issues, our reluctance to spend money (not true); relationships with farm yard animals (not true!); and the health of our beloved Aberdeen Football Club (recovering strongly).
We enjoy this banter and if we are perceived as the stereotypical dour cannie Scot then that is fine by us – perhaps we deserve it. If you ask an Aberdonian how things are going then a typical answer may be “nae bad”. In actual fact this means that things are very good! Indeed if you ask an Aberdonian about the quality of food on their plate then an answer of “fine” would not mean acceptable but in fact means “this food is absolutely excellent!”.
The point is that it is a matter of perception – are we dour cannie Scots or just people with a quiet determination and confidence to get the job done? The answer is undoubtedly the latter, enjoying life in a modern multi-cultural city that is exporting its people and its business expertise throughout the world. The economy in Aberdeen and the North East of Scotland is in good shape and whilst there are always local challenges and disappointments to deal with, the overall confidence in the city is strong and this is reflected in the property market.
2004 was an interesting year in terms of occupier demand for office and industrial property – a year of consolidation for many companies which was reflected in the lower than average take up of space. It is obviously natural for an element of concern when there is reduced activity however all the pointers to us during 2004 were good with a robust oil price, increased drilling and exploration and activity, new entrants to the North Sea and a willingness from operators to improve access to existing oil infrastructure.
Even in the far North we are told that Spring is just around the corner and the early months of 2005 have seen a significant upturn in demand for office and industrial property. Viewings of vacant properties have increased significantly, the level of deals is increasing steadily and the prospects for 2005 are, as we would say, “nae bad”. If we look at recent activity in the office market then it would provides a really good indicator of the local economy, demand from the oil and gas sector is complemented by demand from public sector, business services and professional companies. The Royal Bank of Scotland and Bank of Scotland have both opened new Regional Head Quarters at 1 Albyn Place, totalling 33,000 sq.ft., Aberdeen City Council have taken 21,000 sq.ft. at Aberdeen Exhibition & Conference Centre, BG plc pre-let the refurbishment at 26 Albyn Place and Wood Group took 17,300 sq.ft. at the refurbished Trafalgar House in Altens.
BP have chosen Akeler to be their development partner for a new 172,000 sq.ft. Head Quarters – a huge vote of confidence in the future.
National and local developers and investors continue to provide new build and refurbished accommodation, Highcross / Ashkirk have redeveloped the 62,500 sq.ft. Excel Centre on the Offshore Technology Park; Morley Fund Managers have speculatively built 60,000 sq.ft. at Aberdeen Business Park, Kirkhill; Knight Real Estate have speculatively built 20,000 sq.ft. at Kirkhill Business Park; and Hanover Property Trust have refurbished the 63,000 sq.ft. Exchange on Market Street. All these buildings are attracting tenants or serious enquiries for significant amounts of the available space.
Aberdeen City Council continue their discussions with Aberdeen University regarding the redevelopment of Marischal College with a view to it becoming the new Aberdeen City Council Head Quarters.
£19 per sq.ft. has been firmly established as the prime rent in Aberdeen and there are good prospects for further rental growth during the course of 2005.
The office investment market remains buoyant and the weight of money being allocated to property investments has seen yields fall steadily and the variety of investors acquiring Aberdeen is particularly encouraging – Pension Funds, Property Companies, Overseas Investors and Local Investors are all active.
The industrial market has also enjoyed a significant increase in enquiries in 2005 and the key for industrial landlords is to be aware of the increasing flexibility that industrial occupiers are looking for in their leasing arrangements. Investment activity in the industrial sector has been limited, solely due to the lack of supply – demand for industrial investments is still very strong.
A significant trend in the office and industrial markets is the willingness of owner occupiers to bid competitively for vacant accommodation – developers are finding it increasingly difficult to compete with owner occupiers who are naturally attracted by the low cost of finance and the tax advantages with SIPP acquisitions.
The retail sector is dominated by the Bon Accord Quarter, the further development of the Bon Accord Centre and St.Nicholas Centre proposed by The Scottish Retail Property Limited Partnership, the joint venture between Land Securities and British Land. The proposals envisage a significant expansion of the prime shopping area and improved linkages between the two major Shopping Centres in Aberdeen.
Our confidence in the local economy is confirmed by strong growth in the number of passengers using Aberdeen Airport and a record breaking performance by Aberdeen Harbour Board which enjoyed a 22% increase in cargo in 2004 and enjoyed sixth successive annual increase in the volume of shipping.
The housing market continues to be strong across all sectors, both in the city and in Aberdeenshire and the confidence in the local economy will sustain the strong demand for new housing.
Aberdeen and the North East of Scotland is a major component in the Scottish economy and we see a strong future for the area. We are encouraged by the level of investment in the area by a diverse range of oil companies, financial institutions, public sector bodies, housing developers, educational bodies, property investors and of course local companies.
And who knows – maybe the Dons can secure that final European place and we can dream of 1983 all over again!
