A QUEUE of ambitious refurbishments is currently trying to squeeze its way through an unusual window of opportunity in the Glasgow office market, says Bob Serafini
Research by Knight Frank names 10 such schemes just completed or completing in the city centre in 2016.
These range from 12,000 to 54,000 sq ft in size, and include 100 Queen Street, 100 West George Street, 9 George Square, and 58 Waterloo Street.
Two buildings are in West Regent Street, number 65 and number 120, while three are in St Vincent Street (numbers 149,180, and 220).
A comprehensive redevelopment of the former Odeon cinema is the other project, meaning all are in the traditional core.
The building’s owners include homegrown property companies, private equity firms, overseas investors and pension funds, all realising the timing is good.
The city’s three big speculative office towers are fast running out of their Grade A space – 110 Queen Street is full, the last two floors of 1 West Regent Street understood to be under offer, and five floors have already gone at St Vincent Plaza.
"Other deals on the go mean that possibly for the first time in Glasgow there will be just nothing [of this quality] available," says KF partner Colin MacKenzie.
"A number of schemes with planning permission, like Cadogan Street and Broadway 2, have not moved forward and we are two years away from anything new being completed.
"The timing for these 250,000 sq ft of refurbishments is now good, particularly given the pattern of lease events, which slows down for the next couple of years and picks up again from 2018/2019."
Capital markets partner and head of Glasgow John Rae agreed. "At the moment, if someone was to go in, buy something, and tackle it right away, they could actually be finished and letting it up before any new stuff is out of the ground. It is a pretty exciting dynamic for the refurbishment guys and not one that comes along very often."
So are there more refurb opportunities during this lull in speculative new development? "There are a few, a handful of assets that may or may not be available. We can say to our clients we know who owns them and can try to unlock them for you, but it is not low hanging fruit by any stretch of the imagination."
Rents in this market are also improving – the amount spent on modernisation to today’s standards mean most deals no longer stack up at the £18 per sq ft norm of recent years and in some cases this will achieve £25 and more.
Like many of his rivals, the Singaporean owner of 120 West Regent Street, who bought the property in mid 2014, has introduced a remodelled entrance, comprehensive improvements to office floors and common areas, and upgrading of comfort cooling and heating systems, spending £600,000 on the 12,000 sq building ft in the process.
His initial reward, through advisers Phil Reid Associates and Springford, sees Mediterranean Shipping Company (MSC) celebrating 20 years in Glasgow by relocating to the refurbished second floor and a fresh lease at £19.50 per sq ft.
MSC’s property manager Andrew Woodley said: "When reviewing our business needs in Glasgow, 120 WRS offered the perfect choice of quality building and city centre location. The extensive refurbishment, including fit out to our exacting standards, was carried out in a thoroughly professional manner. We could not be happier with our new environment."
Anchor tenant is secured for Paisley development
THE first occupier of Clark Contracts’ new £1 million development in Paisley is Enterprise Rent-A-Car, which is opening a new branch to serve its customers across Renfrewshire.
The privately owned construction, refurbishment and maintenance contractor has ventured into property development with a design, build and fit out deal for the new vehicle hire centre, now under way on a site adjacent to its own head office in McFarlane Street.
Enterprise has agreed a 20-year lease for a facility in which includes offices, car park, valet area and dedicated entrance.
A major factor in the deal was fast turnaround, with Clark on schedule to hand over the finished project in August, only four months after terms were agreed.
A similar fast turnaround is now on offer for the next phase of the development, with flexible industrial space from 1,400 to 7,000 sq ft for rent at £6 to £7 per sq ft.
Gordon Cunningham, MD of Clark Contracts said: "Being able to work with Enterprise to deliver this project is a great start to this development, and we look forward to welcoming our new neighbour."
Tom Davidson, director of rating at GVA, who advised the landlord, said: "Withdrawal of full rates relief for unoccupied industrial accommodation has effectively stopped speculative development, posing a challenge for potential occupiers who want the most up to date workspace. Clark Contracts has overcome this by offering to design, build and fit out, prepared to the occupier’s specifications, in only four months."
Cunningham added: "Everyone is aware of the growing shortage of good sheds in prime locations, and McFarlane Street offers bespoke individual units which, by using our own construction division for the build process, can significantly reduce the tenant entry dates without the need to build speculatively."
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