Hurricane Energy’s announcement last month of what it called the largest undeveloped oil find so far in UK waters not only sent the exploration company’s shares soaring, it lifted spirits across the North Sea commercial sector.
The news that Hurricane’s Halifax prospect and the nearby Lancaster field could contain one billion barrels of recoverable oil added to the mood in Europe’s oil capital that a corner has been turned.
The latest office market report showed the strongest quarterly take up of property in and around Aberdeen since 2013. Indeed the take up in the first quarter of 2017 – standing at 181,000sq ft – is nearly as much as the 183,000sq ft acquired in the totality of 2016.
A number of large deals have concluded recently, including Total, the French oil giant which has taken an assignation of 108,000 sq ft of office space in Subsea7’s old west campus building in Westhill, and Aberdeen Journals who have taken space in the city’s new Marischal Square development.
We expect this improving trend to continue throughout 2017 as the long awaited Aberdeen Western Peripheral Route has a positive influence on the local market by opening up options for occupiers as transport links improve.
At the smaller end of the market we have recently concluded a number of lettings of small industrial units, with particular interest from start-up businesses looking to capitalise on the upturn. Interest also remains relatively strong from local investors looking to purchase small investments as property continues to provide attractive returns.
Certainly, there is still a lot of available stock on the market and not as many occupiers as landlords would like to see chasing it. In that respect, it still remains a tenants’ market and landlords will need to be flexible on the terms they can offer particularly on older second hand stock.
Many landlords and occupiers have been adversely affected by significant increases in the recent revaluation exercise. The impact of this came a short time after the changes to empty property relief which has affected industrial landlords in particular. The support package from the Scottish Government limiting rates increases for the hospitality sector and for office premises in Aberdeen and Aberdeenshire is limited to 12 months which serves only to delay the full impact of the rise. We would advise all business rates payers to seek professional advice as to their options.
Looking further forward the Aberdeen City Region Deal and associated £400 million Nigg Bay development, designed to meet future demand for berthing space, will bring commercial opportunities to the city, including retail space for cruise ship passengers.
All in all, there are grounds for believing that in the Granite City the season for optimism is upon us once again.
Kevin Jackson is a senior associate at DM Hall’s Aberdeen office.