Are you in or out?

19 October 2016

Pamela Gray examines the city centre vs business park options facing office occupiers.

The Brexit vote may be over, but another in/out dilemma challenging many businesses is whether to locate in or out of the city centre.

This is particularly so in Edinburgh where the imbalance between supply and demand in the city centre has meant that, depending on the size category, there is such competition for space that incentive packages have reduced dramatically, with upward pressure on rents. 

The main options for occupiers are city centre, edge-of-centre and out-of-town/business park locations. While the underlying drivers of demographics, working practices and transport links have recently led to an overall increase in demand for city centre premises, other factors can influence the final choice. The city centre is generally expected to score highly on connectivity and on provision of amenities, but, for some employers, access to motorway networks is the key measure of an ideal location. For others open space and proximity to a particular workforce or affordable suburban housing are the main determinants. 

City centres attract large numbers of young people, vital for staff recruitment and retention.

Better transport provision has given companies the chance to promote sustainability. They encourage and support the use of trams, buses and trains along with increased opportunities to walk or cycle to work. New and refurbished buildings are expected to offer associated facilities such as showers, changing rooms and bike racks. This has an increased demand for city centre offices, but, with demand outstripping supply in key cities such as Edinburgh, rent and rates increases are inevitable.

Some occupiers will opt for out-of-town locations, driven by their proximity to strategic road and air links, the location of key employment clusters and the obvious cost advantages.

Office parks with the right mix of amenities and transport connections can sometimes outperform city centres.

Also, the car-parking ratio is usually better outwith the city centre and often included in the rent. Some occupiers who have historically regarded having a prime city centre address as sacrosanct are now questioning whether they really need to be paying premium rents to accommodate the entire workforce in one location, particularly when the costs of occupation could potentially be halved by moving to an edge of town address.

As a result we are beginning to see a growing number of large space users looking at a mix of city centre and edge-of-town options, keeping key teams together; preserving the city centre address while reducing overall occupational costs. 

With rents set to continue to rise in the city centre, there will inevitably be knock-on effect on rents in edge-of-town locations. A prime example of this is on the western edge of Edinburgh's city centre, where deals to HSBC, Origo Services and JP Morgan have soaked up much of the supply of good quality, modern office accommodation within the Gyle and Edinburgh Park, again leading to upward pressure on rents. We have even seen the re-introduction of the closing date - unheard of in recent years.

The good news for occupiers is that there are options to suit their accommodation criteria and, with ever more flexible leases, the chance to evaluate space requirements to aid business performance. 

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