WELCOME FROM GKRE DIRECTOR, DOUGLAS GREEN

Glasgow is Scotland’s largest city and the third biggest in the UK. The launch of the city’s

International Financial Services District in 2001 has given the city huge impetus, leading to over £1bn worth of investment and the creation of more than 15,500 new jobs.

The city received a further boost last year when Scotland’s biggest ever property deal was announced – Barclays agreeing to buy nearly half a million square feet of Grade A office space for new headquarters at Buchanan Wharf.

As well as being a centre for financial services, Glasgow is the UK’s fourth largest city for legal jobs outside London and a renowned centre for the technology, manufacturing, energy, and engineering sectors.

Its central business district is thriving, but a lack of speculative development has seen rents rise and an acute shortage of Grade A stock. Flexible workspace operators have stepped in to help fill the void and provide occupiers with the flexibility they now demand.

National operators Regus, Spaces, Landmark and Orega, as well as a number of local independents, all have a presence in the city and we believe more operators will join them in the months ahead. WeWork is already looking to secure space in the city.

We also anticipate many landlords trying to get involved in the market by partnering with operators as EPIC have done with Orega, which you can read about on page 5.

Development such as Buchanan Wharf will see the central business district extend beyond its current boundaries opening up further opportunities for flexible workspace operators away from the city centre.

You can read about the state of the market and its prospects on the following pages.

GLASGOW: THE FLEXIBLE WORKSPACE MARKET

We hope you find this report interesting. If you have any queries in relation to flexible workspace, please contact me at douglas@gkre.co.uk.

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THE STATE OF THE

FLEXIBLE WORKSPACE MARKET IN GLASGOW

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LOCATION OF CENTRES

Glasgow’s commercial centre is divided into three parts: the international financial services district (IFSD), the retail and theatre district, and Merchant City.

Established in 2001, the IFSD is situated on the western edge of the city centre and is known locally

as “Wall Street on the Clyde” or the “square kilometre”. Occupiers in the IFSD include a number

of banks and insurance companies such as Direct Line, BNP Paribas, JP Morgan, Barclays, NFU

Mutual, Morgan Stanley and AON. Over three million sq ft of Grade A space has been completed in the IFSD and it is home to a number of the city’s new landmark buildings.

Despite this, there are few flexible workspace operators directly in the IFSD and most city centre workspace is located a short distance away to the east, in and around the eastern end of St Vincent

Street, Buchanan Street and George Square, the city’s main civic square. This is very much the

heart of the city, close to Glasgow Central and Glasgow Queen Street stations and full of bars, restaurants, nightclubs and hotels. It is also near the city’s main shopping district centred around

Argyll Street.

Operators in this central district include Orega in George Square, Landmark and Spaces further

to the north west in West Regent Street, Regus in Buchanan Street, and Centrum on the edge of

Merchant City in Queen Street.

Like many of the UK’s other major cities, Glasgow has some pockets that are dominated by creatives and starts-up (similar to the Northern Quarter in Manchester and Digbeth in Birmingham). One such area is Glasgow’s East End, which is home to Creative East End and Many Studios, both of which offer workspace, events and meeting spaces to creatives.

Another is the industrial area adjoining Speirs Lock in north Glasgow, which is a hotbed for

creatives across a number of artistic and creative fields. Occupiers in and near this area include the Scottish Opera, the National Theatre for Scotland, Glasgow Academy of Music, Theatre & Arts, (GAMTA), the Glue Factory Gallery and Tollhouse Studios.

The Whisky Bond in Speirs Lock describes itself as “a community of designers, photographers,

film-makers, architects, brands, social entrepreneurs, marketing specialists and tech startups”. Its community manager Abigale Neate-Wilson says she has noticed in recent months “that there has been a migration of artistic and creative workers from places such as London and Manchester due to Glasgow’s affordability.” It also helps, she says, that Glasgow is renowned as one of the UK’s creative centres. Other independents include Toad’s Caravan, a creative production studio and co-working space in the south side of Glasgow, and RookieOven in Govan to the west of the river Clyde, which is home for many of the city’s tech community.

With a shortage of Grade A office space in central Glasgow, we expect more independently owned flexible workspaces to spring up on the edge of the central business district and on the outskirts of the city centre.

George Square – Orega3

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TYPES OF SPACEMost of the space in Glasgow is what local operators still refer to as “serviced offices”. There is not quite the variety of space you find in London and other leading UK cities, although co-working and lounge/club space is available in some places. Operators have commented that the demand for serviced office space is much greater than the demand for co-working space, which explains why few operators in the central business district are offering the latter.

Some centres are in modern, state of the art office buildings such as Landmark’s 2 West Regent Street and others in refurbished period buildings such as Seven Buchanan Street.

Outside the central district, workspace tends to be in buildings repurposed from their former uses, such as The Whisky Bond, formerly a warehouse for distilleries, and RookieOven, part of an old shipyard.

Almost one-third of office deals in Glasgow in 2018 were lettings of less than 5,000 sq ft, many to professional services firms. Elsewhere in the UK, much of the demand for this size of space is now going to flexible workspace, which is making many property owners review their options and consider moving into the sector. We see no reason why Glasgow should be any different. We expect Glasgow property owners to consider alternative leasing arrangements, such as profit share arrangement and management agreements with operators, as Orega has done with EPIC (see feature on page 5).

At the end of 2018, WeWork instructed CBRE to look for space of more than 30,000 sq ft in both Glasgow and Edinburgh. WeWork is said to favour existing buildings over new builds so that it can expand as soon as possible.

FLEXIBLE SPACE OCCUPIERSOccupiers from every sector and of every size are using flexible workspace in Glasgow, including recruitment companies, professional services firms, financial institutions and creatives. Scotland has a strong energy industry and many of its occupiers are involved in this sector.

Due to the lack of Grade A office space in the central business district, many larger corporates are also using flexible workspace as spill over space from other nearby offices.

PRICESPrices in the central business district range from a top end of around £375 plus IT and telecoms per workstation per month down to around £250 to £200 in the central business district. As ever, this is driven by location, the fit out and the quality of the service.

Ashleigh Corbett, Sales and Customer Service Manager at Orega’s workspace in George Square, believes having full on-site staffing doing the billing, answering calls, and dealing with issues is a big differentiator: “When I look at what we are providing compared to competitors, we are trying to create somewhere where people want to stay once they are in. It’s not just about getting a deal over the line, we want their business to stay and grow and we want to attract customers who previously went for the cheaper option and have discovered that the level of service just isn’t there.”

In terms of co-working, Spaces Charing Cross offers business club membership for £190 per month. Orega’s lowest price virtual office package includes lounge membership from £490 per year and Landmark offers club space for £50 per month at its West Regent Street office.

RookieOven offers hot-desking from £120 per month and a fixed desk from £175, while The Whisky Bond charges the same for fixed desks and £100 per month for hot-desking.

Dawson Road – The Whisky Bond. Photo credit: Abigale Neate-Wilson

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NAME OF CENTRE LOCATION OPERATOR

Orega Glasgow 9 George Square, Glasgow, Lanarkshire, G2 1QQ

Orega

Glasgow Buchanan Street 69 Buchanan Street, Glasgow, Lanarkshire, G1 3HL

Regus

Seven Buchanan Street 7 Buchanan Street, Glasgow, Scotland, UK, G1 3HL

LBP Office

Glasgow Collective 15 East Campbell Street, Glasgow G1 5DT Glasgow Collective

Collabor8te 22 Montrose Street, Glasgow, G1 1RE Collabor8te

South Block 60-64 Osborne Street, Glasgow G1 5QH Wasps

Creative East End Creative East End, 200 Gallowgate, Glasgow G1 5DR

Creative East End

Centrum House Centrum House, 38 Queen St, Glasgow, G1 3DX

Centrum

St Enoch Business Centre Suite 1/1, 34 St Enoch Square, Glasgow, G1 4DF

St Enoch Business Centre

200 SVS 200 St Vincent Street, G2 5SG 200 St Vincent Street

societyM Glasgow 60 Renfrew Street, Glasgow G2 3BW Citizen M Hotel

Spaces Charing Cross Tay House, 300 Bath Street, Glasgow, Lanarkshire, G2 4JR

Spaces

Spaces West Regent Street

1 West Regent Street, G2 1RW Spaces

Glasgow West George Street

100 West George Street, G2 1PP Spaces

Landmark, Glasgow West Regent Street

2 West Regent Street, Glasgow, G2 1RW Landmark

Nexus Business Space 126 West Regent Street, Glasgow, Lanarkshire, G2 2RQ

Nexus Business Space

HQ, Glasgow Woodside Place

Woodside House, 20-23 Woodside Place, Glasgow, Lanarkshire, G3 7QF

Regus

4 Woodside Place 4 Woodside Place, Charing Cross, Glasgow, Lanarkshire, G3 7QF

Woodside Business Centres

The Whisky Bond 2 Dawson Road, Glasgow, G4 9SS The Whisky Bond

Many Studios 3 Ross Street, The Barras, Glasgow, G1 5AR Many Studios

Ninja Unicorn Unit 1 & Attic 55 Ruthven Lane, Glasgow, G12 9BG

Ninja Unicorn

Toad’s Caravan 745 Pollokshaws Road, Glasgow G41 2AA Toad’s Caravan

RookieOven Fairfield Shipyard Offices, 1046-1048 Govan Road, G51 4XS

RookieOven

Creative East End 200 Gallowgate, Glasgow East End G1 5DR Creative East End

Argyle Street

Glasgow Central

Sauchehull St

Argyll St

Charing Cross

High Street

Glasgow Queen Street

MERCHANT CITY

GEORGE SQUARE

ST Vincent St

Buchanan St

INTERNATIONAL

FINANCIAL SERVICES

DISTRICT

GLASGOW FLEXIBLE SPACE MARKET

MANAGEMENT AGREEMENTS

– THE FUTURE OF FLEXIBLE WORKSPACE?

Orega’s George Square centre offers a glimpse into how we may see many deals in the sector taking place over the next few years. Orega took 29,929 sq ft at 9 George Square on a 10-year management agreement from the building’s owner, EPIC. The deal enables Orega to operate a centre in one of Glasgow’s most prestigious locations and allows EPIC to get involved in the flexible workspace sector. This gives EPIC the potential to generate income far in excess of ERV, as well as keep ‘ownership’ of their tenants and incubate them for future lettings. This is a model many property owners are embracing as it gives them entry into property’s fastest growing market using the expertise of an experienced operator.

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RECENT OFFICE ACTIVITY

Pollokshaws Road – Toad’s Caravan

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• 187,205 sq ft pre-let to HMRC in a new 10-storey development at Atlantic Square, Argyll Street for a minimum of 20 years. This is expected to accommodate 2,700 full-time employees by 2021.

• 110,955 sq ft pre-let to Clydesdale Bank at 177 Bothwell Street. This is currently under construction, with completion due in late 2020.

These larger deals overshadowed an active market for smaller lettings, with almost a third of the deals done during the year being for less than 5,000 sq ft. Typical deal sizes were around 3,000 sq ft with significant demand coming from professional services firms.

Take up by sector for the year was: public sector, not-for-profit and charities – 44%; finance banking and insurance –, 17%; professional services – 8%; flexible workspace – 7%; technology, media and telecoms – 5%, other – 19%.

A lack of new development over the past few years has resulted in the vacancy rate for offices in the city centre dwindling to 9.9% and rents reaching record levels of £32.50 psf for new Grade A offices (for Clydesdale Bank’s pre-let). The best refurbished space is at £30 psf.

RECENT OFFICE ACTIVITYThe largest transaction by a flexible workspace operator last year was Regus’s 30,933 sq ft letting of 1 West Regent Street, Glasgow. Spaces, Regus’s ‘co-working’ brand also added space in the city, taking the refurbished 100 West George Street, Glasgow (19,686 sq ft).

2018 was a record-breaking year for Glasgow city centre with take up of 1,425,419 sq ft. This was an increase of 127% over 2017’s 627,313 sq ft and more than double the five and 10-year averages.

The biggest deals of the year were:

• Drum Property Group agreeing a multimillion pound deal with Barclays to develop a new state-of-the-art campus headquarters for the bank at the Buchanan Wharf development. Barclays has agreed to buy 470,000 sq ft of prime Grade A office space creating room for around 2,500 new jobs into the city and making Barclays one of the city’s biggest employers. This is the single biggest deal ever recorded in Scotland.

• Barclays has an option to extend their campus by an additional 210,000 sq ft in a second phase of development.

East Campbell Street – Glasgow Collective

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BUCHANAN WHARF – REDEFINING GLASGOW’S CITY CENTRE

Buchanan Wharf will extend Glasgow’s city centre boundaries by creating a new central district on the south bank of the Clyde, facing the IFSC and directly opposite Glasgow Central station. It will comprise what the developer, Drum Property Group, calls a blend of “modern living and dynamic workplaces with international class facilities and unrivalled connectivity, creating a stimulating and engaging destination on the Clyde”.

The scheme will include a million square feet of prime Grade A office space, residential accommodation and a mix of local amenities including cafés, restaurants and creative spaces for use by residents, employees and the wider community.

The heart of the site will be Barclay’s new ‘campus’, which will house up to 2,500 new employees in 470,00 sq ft of Grade A offices. Barclays also has an option to extend the campus by a further 210,000 sq ft in a second phase of the development.

Buchanan Wharf was previously a run down part of the city and the development comes as a result of Glasgow’s growing popularity and the need to expand to the city centre in order to meet demand.

THE INVESTMENT MARKETThere remains strong investor demand in Glasgow with recent deals achieving yields in the region of 4%. Key deals last year included DTZ Investors’ acquisition of 122-128 Buchanan Street for £9.4m (a 4.2% yield) and Pontegadea’s purchase of 78-90 Buchanan Street for £31m (a 4% yield).

.UPCOMING ACTIVITY

The city’s only speculative development currently being marketed is Cadworks, a 94,000 sq ft development by FORE Partnership, which is due for completion in 2020. Rents are expected to reach new record highs for the city.

The lack of Grade A stock is driving a number of refurbishments of second hand stock, including 77,325 sq ft at 55 Douglas Street and 35,000 in the Ink Building.

Other development plans include M&G Real Estate’s The Grid, a 12-storey 277,500 sq ft building on Cadogan Street in the heart of the central business district.

The letting market is likely to remain strong as there is more than one million sq ft of named demand from occupiers such as WeWork, Network Rail and JP Morgan. This continuing demand could lead to pre-lets on new development sites including Osborne + Co’s 285,000 sq ft Argyle Street development.

OTHER ACTIVITYSavills reports that LandSec is exploring developing 100,000 sq ft offices and 25,000 sq ft of new retail on Buchanan Street/Dundas Street.

Fairfield Shipyard – Rookie Oven

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GLASGOW’S ECONOMY AND ECONOMIC PROSPECTS

200 SVS – 200 St Vincent St

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KEY STATISTICS

• The largest city in Scotland and the third

biggest in the UK

• The top location in the UK for financial services outside London

• The second highest number of technology, media, telecommunications in the UK outside London

• The third largest centre for education in the UK with more than 190,000 students

• One of the UK’s largest manufacturing and technology centres with several FTSE manufacturing companies based in the city

• Outside of London, Glasgow is the fourth largest centres for legal jobs

• Glasgow is a UK hub of film and broadcasting, boasting 4,943 jobs within the industry and this is expected to increase by 10% over the next five years

• The city’s economic strategy aims to make Glasgow the most productive major city economy in the UK by 2023

GLASGOW’S ECONOMY AND ECONOMIC PROSPECTS

Glasgow is the UK’s third largest city. It has the fastest

growing major city economy in the UK, with a diverse business and industrial base and a highly skilled population.

Its city region represents one third of the Scotland’s population, jobs and businesses. In the past it has been dominated by shipbuilding, engineering and manufacturing industries and while these remain important the city’s economy has evolved. It is now a world leader in precision medicine, quantum technologies and advanced manufacturing. It is also the top location in the UK for financial services outside London with both JP Morgan and Barclays investing heavily in the city.

Glasgow is the most skilled large city in the UK outside London and has a graduate level workforce significantly above almost all major cities in the UK, with 46.3% of the workforce educated to degree level.

In 2014, Glasgow negotiated the biggest city deal in UK history. (A city deal is an agreement between a city and

the government that gives the city freedom to spend public money in order to generate growth.) Glasgow’s deal locked in capital investment of over £1.3bn into the city-region over 10 years.

At the halfway point of this deal in 2019, all 27 projects that form the deal have been selected, six have been completed and most are underway. These include the The Avenues Concept , an investment by Glasgow City Council into infrastructure and public realm intended “to make the city more attractive, people-friendly, and economically competitive”. The city deal is set to bring an estimated £3.3bn of private sector investment in to the city over the next 20 years.

The city has seen the third highest level of commercial property investment in the UK in the past decade, excluding London. Barclays investment at Buchanan Wharf (see page 8) will be the most significant ever made into the city. This follows JP Morgan’s continued expansion in the city, one of the biggest foreign direct investments in recent years.

Dawson Road – The Whisky Bond

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GKRE is the UK’s leading specialist flexible workspace agency. Founded in 2013, the directors bring to GKRE more than 30 years’ experience in the flexible workspace industry between them.

Our clients include operators and landlords across the UK, from major PLCs to independent companies.

We have completed more than 35 joint venture/management agreements throughout the UK, totalling more than 500,000 square feet.

We have recently been involved in the merger and acquisition of businesses worth over £40m, comprising more than 450,000 square feet in some 50+ buildings. On the agency side, we have acquired in excess of 500,000 square feet for the UK’s leading operators.

GKRE advises landlords and building owners throughout the UK on their flexible workspace options and opportunities to partner with flexible workspace providers.

Please visit gkre.co.uk for more information on how we assist property owners, tenants and flexible workspace operators, and for details of our latest transactions.

ABOUT GKRE

We have been nominated as both specialist and niche agent of the year by Estates Gazette and Property Week

www.gkre.co.uk

11 Golden Square, London W1F 9JB

020 3427 5679

Douglas GreenE: douglas@gkre.co.ukT: 020 3427 5678M: 07855 825 088

Will Kinnear, MRICSE: will@gkre.co.ukT: 020 3427 5677M: 07811 942 752

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