'Flight to quality' defining major Scots property market

The Herald Scotland

06-08-2025

New or Grade A office accommodation accounted for around 66% of take-up in Scotland last year, as occupants homed in on high-quality, amenity-tich and well-located environments, with flexibility in both lease terms and space usage, research from Knight Frank has found.
This demand has been exerting upward pressure on rental levels in Scotland's two biggest cities, with prime rents in Edinburgh found to have achieved £46 per square foot - exceeding the £45 per sq ft "milestone" reached by the end of last year. Glasgow rents surpassed £40 per square foot, rising to £41.50 per sq ft, according to the property consultant's Scotland Report 2025. Rents in Aberdeen remained stabled at £32.50 per sq ft.
The Knight Frank report underlines the recovery of the Scottish property market since the onset of the coronavirus pandemic more than five years ago. Edinburgh rents have increased by 30% and in Glasgow they have risen by 28% since March 2025, the agent found.
However, while tenants have embarked on a 'flight to quality', the amount of space they are seeking has been falling. While deal volumes in Glasgow and Edinburgh rose by 30% and 13% in 2024, transactions for offices below 10,000 sq ft in size accounted for 91% of the Scottish market, signalling that flexibility has become a bigger priority than total square footage.
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Notable deals concluded recently have included engineering group WSP committing to 18,500 of space at 110 Queen Street in Glasgow, and law firm Addleshaw Goddard taking 30,000 sq at St Andrew Square in Edinburgh. Energy consultancy Wood Mackenzie signed up to a similarly sized space to the latter at Waverley Gate in the Scottish capital.
Toby Withall, office agency partner at Knight Frank, said: 'There is a clear trend in occupier requirements – they are increasingly prioritising buildings which offer amenities and flexibility. The space they use needs to be capable of adapting to fluctuating workforce sizes and the uncertain economic backdrop we have seen over the past couple of years, which inevitably has an impact on business performance.
'From a landlord perspective, anticipating and responding to those needs with the best possible location and high-quality, flexible, and sustainable spaces is essential. These features are no longer optional – they are critical to attracting and retaining occupiers. That said, challenges remain around development viability, with further growth and sharper pricing potentially required to bridge that gap fully.
'For occupiers, the balance is more around aligning their space with evolving work patterns. There is growing emphasis on environments that support wellbeing, collaboration, and sustainability – and we have seen offices that meet those needs experience stronger demand. We only see that trend accelerating as the workplace continues to evolve.'
Knight Frank reported earlier this year that Scotland's commercial property market attracted £750 million of investment in the first half of 2025, against a backdrop of geopolitical tensions and a shifting policy landscape.
Hotels were the top-performing asset class, with £213 million of investment. That was the second highest figure for the sector during the first six months of any year since 2020, behind only the £235m transacted over a similar period in 2024. Retail was second with £207m worth of transactions, followed by offices with £152m.
Alasdair Steele, head of Scotland commercial at Knight Frank, said: 'Leasing activity has continued to show resilience, particularly in the major commercial centres where performance is increasingly concentrated within a limited pool of high-quality assets. Occupiers are acting decisively when the right product becomes available, with standout transactions reflecting pent-up demand from organisations that can delay commitments no longer.
'Investment volumes for 2025 so far reflect broader macroeconomic headwinds, yet deal interest continues – particularly for prime, well-let assets. Buyers are selective, and due diligence timelines have lengthened, but interest persists. The consultation on creating tax parity between commercial properties in England and Scotland should also provide further support to the market.
'Divergent growth has been one of the main trends for the Scottish commercial property sector. The market remains responsive for landlords and vendors holding high quality, well-let assets in prime locations. For others, adaptability, realistic pricing, and a willingness to align with the evolving demands will be the defining focus of attention.'