Office Space Trends In Aberdeen

This time last year we wrote that Aberdeen’s economy was on track to be the fastest growing in Scotland by the end of 2022. The picture is not quite as rosy in 2023, but some sectors are still enjoying a positive outlook amidst a mixed forecast overall.

Windfarm in Aberdeen

Scotland’s economy is expected to contract slightly over the course of 2023 before starting a very gradual recovery in 2024. According to the Irwin Mitchell City Tracker which is produced by the Centre for Economics and Business Research (CEBR) Aberdeen will see a slight decline in growth throughout 2023 while Edinburgh and Glasgow will start growing again towards the end of the year.

Many sectors are benefiting from significant investment but the effects on some sectors such as tourism and food and drink will be diluted in the short-term by the cost-of-living crisis.

Which Parts of Aberdeen's Economy Are Growing?

The energy sector continues to support the other parts of Aberdeen’s economy.  One reason for this could be that its position of oil and gas capital of Europe is being superseded by its reputation as the green energy king. The UK Government has pledged faith in this new title by granting the North Sea Transition Deal to the city: a partnership that will see a mighty £16 billion investment, over the next ten years, to help the oil and gas sector meet its net-zero target.

Sadly, the boost in green investment is not the only reason for the growth spike: geopolitical unrest has seen oil prices rocket. In addition the Government is pushing to obtain a greater proportion of the country’s energy from domestic sources, and further licenses for exploration and production and likely to be granted. Projects that were previously mothballed have now been bought back to life. As a result 79% of companies in the sector are predicting increased revenues in 2023 and 65% expect to increase recruitment in the next three years. The argument for more reliance on domestic sources is clear; UK exploration and production is seen as more sustainable and reliable.

Record Levels Of Investment In Aberdeen

The Aberdeen City Region Investment Tracker, published in May 2023 by Aberdeen & Grampian Chamber of Commerce, Invest Aberdeen and Opportunity North East paints an exciting picture.  There is £15.85 billion of investment planned in the region in the next ten years, across a wide range of sectors. Particular growth areas are offshore wind and hydrogen production and distribution, further enhancing Aberdeen’s low carbon credentials, plus cultural projects like the long-awaited redevelopment of the city centre around Union Street. The South Harbour will also be completed this year, and is already benefiting from the opportunity to accommodate larger cargo vessels as well as cruise ships.

The increased investment is reflected by the positive response in Aberdeen’s office space market.

Aberdeen Office Space Occupation

According to David Smith, managing director of CBRE in Scotland, Aberdeen is experiencing the strongest occupational and employment market it has seen for eight years, finally recovering from the last downturn in the energy market.

Demand in Scotland is high for inviting, energy efficient office space, and refurbished buildings using sustainable methods.

Looking at Savills’ roundup of the Aberdeen Office space market for 2022, office take-up was nearly double the previous year’s figures with rents remaining pretty constant. Moving into 2023, deals in the first quarter of the year were 6% up on the Q1 average although take-up had declined year on year.

Ryden’s view of the start of 2023 is similar, “It has been a disappointing quarter from a take up statistics perspective. However, there are a number of substantial deals ‘under offer’ and requirements in the market seem to be improving. The uncertain political landscape certainly isn’t assisting matters.”

Despite the slow start to the year, Savills forecast that investment in commercial property in Scotland will pick up over the course of 2023 and will exceed last year’s £2.39 billion.

Is the picture in Aberdeen reflected by the UK’s office space market?

British households are being squeezed by high inflation and the soaring cost of living. Not since the Second World War have the size of disposable incomes dropped to such an extent. A declining spiral is reinforced by a lowering of consumer confidence.

In areas dependent on retail, and its accompanying logistics operators, it would be reasonable to assume that this would have a negative impact on the office space market. However, while unemployment levels remain relatively low, demand for office space is stable. In particular the high quality space mentioned above, in sustainable and energy-efficient buildings, is in short supply and it is expected that older buildings will have to be refurbished to meet new standards and expectations. Edinburgh and Glasgow are, in fact, experiencing a shortage of high quality, “green” office space of a sufficient calibre to attract new corporate occupiers into the city centres.

Serviced offices and coworking spaces are in demand as businesses opt for maximum flexibility during a time of economic uncertainty. Meanwhile rental prices have slightly increased since the lows of 2021.

Office Space in Aberdeen

Hybrid Working & Impact On Office Space

A recent survey in February 2022 showed that the majority of companies (64%) have embraced hybrid working. This compares to 21% returning to the office full time and 15% being fully remote. Undoubtably, the pandemic accelerated the move to hybrid working but the Office for National Statistics highlights that this working revolution was already in progress. Between the years of 2015 and 2019 the number of employees working from home was increasing over time. As this is not linked wholly to the Covid-19 crisis, it suggests the trend is here to stay.

There is a disparity in the size of business when it comes to adoption of homeworking. Small businesses are less likely to give their employees this option with 66% agreeing that this practice had increased compared to 93% of larger corporations. This shows that the debate on its efficacy is still significant.

Office Space Effect On Productivity

The key points in the argument focus on worker wellbeing and productivity levels. The Royal Society for Public Health looked at homeworking conditions and some of the results were stark. 26% did not have the luxury of a home office: they worked from a sofa or bedroom. As a result, it is no surprise to report, that 48% has experienced physical problems with their muscular or skeletal systems. Mental health has also been affected by the shift in working patterns with 67% experiencing feelings of isolation; yet only 34% had been offered any mental health support from their employers.

Although productivity initially increases when employees are offered a working pattern to suit their needs, The Times canvassed chief executives who warned that the benefits could be diminished if training and support was not maintained. This is a hard task to implement remotely and companies have seen a drop in their overheads through a remote or hybrid model making it attractive to employers. The flexibility financially of not being tied to a fixed contract office space is a definitive plus. So how do you maintain the contact with staff and their training whilst retaining the flexibility of a hybrid model?

Renting a flexible office space can create a balance between the two requirements. 74% of professionals found their productivity to increase after working in a shared office space.

Aberdeen Office Space

Why Rent Office Space In Aberdeen In Particular?

We have already looked at its resilience in the face of current economic pressures due to green technologies and the more traditional oil and gas employers. It is the third largest city in Scotland and a commercial hub for several industries.

Research and development facilities tend to rent in areas around the University in Old Aberdeen. Those of a more medical leaning are in the west end by Aberdeen Royal Infirmary. The main port plays host to the energy and marine industries, as well as logistics to the energy sector. This diversity of commerce has ensured efficient transport links both nationally and globally.

Aberdeen Energy and Innovation Parks have two sites in locations just minutes from Aberdeen city centre. They offer a wide choice of flexible options for all types of business.

A variety of office space configurations can be created: from coworking spaces to research and development laboratories. The facilities available are world class, ensuring that the balance between staff productivity, and their welfare, are met.