CoStar Analysis: Dundee office rents return to growth as city rides wave of optimism

By Grant Lonsdale - Wednesday, June 13, 2018 10:59

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Average asking rents for office space in Dundee have risen for the first time in more than three years, according to the latest data from CoStar Group.

Average asking rents in Dundee - Scotland’s fourth largest city by population - edged up in the 12 months to June 2018, marking an important turnaround for the city’s office market and suggesting growing confidence among its landlords. Until recently, average office rents in Dundee had been falling amid rising vacancies and subdued demand for office space. Vacancies, however, have since stabilised following a slight improvement in demand over the past few quarters.

While the recent rent growth is positive news for investors, potential occupiers are unlikely to be discouraged because Dundee remains one of the most affordable locations in Scotland to rent office space. At the time of writing in June 2018, the submarket is one of just 10 across the country with average asking rents less than £10 per sq ft. Dundee therefore offers a weighty concession over the Scottish average of £15 per sq ft, even before incentives are considered. That discount becomes even more substantial when compared to Edinburgh’s Exchange & Fountainbridge and Aberdeen’s West End, where average asking rents stand above £24 per sq ft.

Occupiers will soon have more options as two office-led developments are due to come on stream over the next 12 months. Water’s Edge, the smaller of the two, is expected to deliver imminently and is targeting occupiers in the creative sector. Meanwhile, the speculative office block under construction on Dundee Waterfront’s site six is fast progressing. With Scotland’s new social security agency set to create 750 jobs in the city over the next few years, the flagship development next to the V&A could prove expertly timed.

Dundee is in the midst of a 30-year project to transform its waterfront and recently placed sixth on Lonely Planet’s ‘Best in Europe 2018’ hotlist. The opening of the V&A in September will cap off what many believe could be a pivotal year in Dundee’s regeneration. And with 2018 far from over, CoStar data suggests that this year is shaping up to be a positive one for the city’s office market.

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