Colin Mackenzie
Founder
colin@mc2-offices.com
+44 (0)7912 805 890
Turn old Glasgow offices into homes, property veterans say.
TWO of the best-known figures on the Scottish commercial property scene have signalled hope that a brighter future can be secured for Glasgow’s ageing office stock, as debate continues to rage over how best to reverse the declining fortunes of the city centre.
Andy Cunningham and Colin MacKenzie, former rivals who linked up to launch Glasgow agency MC² earlier this year, say moves to transform post-war office blocks into smaller, flexible spaces with interior designs more akin to hotels and homes are breathing new life into older buildings in the city.
They say the trend of re-purposing older properties could underpin ambitions to encourage more people to live in Glasgow city centre, with many buildings ripe for conversion into residential use.
Mr Cunningham and Mr MacKenzie, who between them have amassed decades of experience cutting deals in the property sector, joined forces after frequently “pitching against each other” while working for major agencies. MC² has already brokered some of the biggest transactions in Glasgow this year, including the letting of 55,000 square feet of space at Aurora, one of the city’s premier office blocks, to PWC, Cubo Works and Arcadis.
It also negotiated HSBC’s deal to lease 55,000 sq ft at Maxim Park, Lanarkshire, one of the largest single lettings seen in Scotland for some time.
Commenting on general office market trends in Glasgow, the duo pointed to the emergence of flexible spaces in buildings that would previously have been leased in the more traditional, larger office format.
They also observed that the new standards of interior design and ancillary services these spaced offer is helping employers looking to encourage staff to come into the office more frequently, following the shift to working from home during Covid.
Mr MacKenzie a former partner at Knight Frank told The Herald Business HQ: “If you take St Vincent Street as an example, which was the premier street in the city at one point, the average floor plate size is something like 4,500 to 5,000 square feet. That was traditionally good for maybe 45-50 employees.
“But what you are now seeing is those buildings that have been there for probably 60 years, each of those floor plates have been split up to provide quite luxurious suites of two or three in that 5,000 sq ft. Some of it is quite breathtaking space when you go in – it is all glass walls and support services, and it looks really cool. And they are getting good rents for them. It is just a different way of tackling buildings. There are some great examples on St Vincent Street actually.”
An example of this approach emerged in Glasgow in September, when property firm SRE Group launched the flexible office space The Courtyard in a former Police Scotland building at 255 St Vincent Street. The company said The Courtyard “represents the evolution of workspace in Glasgow”, where there is demand for “interesting, contemporary walk-in space”. Offices are set around a bright courtyard adorned with greenery and bleacher seating, with facilities including a shared kitchen and meeting rooms.
Mr MacKenzie highlighted 130 St Vincent Street and Framework on the same street, as well as the Onyx building on Bothwell Street as good examples. He added: “They were boring vanilla traditional buildings before landlords changed them.”
Mr Cunningham said Scotland is beginning to follow in the footsteps of London with the emergence of a “flex” office market.
“In Scotland the flex market is quite small at the moment but what business centres there are in Aberdeen, Edinburgh and Glasgow are mostly all full, and their desk rates are going up hugely,” he said.
“Landlords in Scotland have recently cottoned on to fitting out space and putting in some of the nice things that you get in a business centre, but in smaller floor plates. Those buildings are doing well.
“Glasgow has always had good demand below 5,000 square feet – of different shapes and sizes.
“Some of that top-end, big building mentality is being used in the smaller market. That’s always been there. It churns. That is a positive market.”
He added buildings that have been given softer designs, which feel more like offices or residential accommodation, are proving to be increasingly popular with tenants.
“You can view lots of buildings in a day but the ones that stick out, and those that people want to take, are the ones with the best locations, and those with beautifully crafted interior designs,” he said.
Moreover, Mr Cunningham, who was formerly the head of Glasgow office agency at CBRE, also raised the prospect of office buildings, which have come off long-term leases, and do not have the market value they previously did, being converted for residential use.
He suggested it could help the city council realise its long-term ambition of attract thousands more people to live in the city centre, helping Glasgow emulate leading European city centres such as Paris, Copenhagen and Berlin.
Mr Cunningham said: “Colin and I can walk into a building and go: ‘That is not an office anymore.’ It is a strange thing to say but you can tell as soon as you go in: maybe it is location, the floor plate sizes are wrong, and investment is needed.
“In these cases it has to go to alternative uses, so [that could be] residential, student, co-living, even houses for sale. That market is going to come in over the next 10 to 15 years and people will look at office buildings to see if they can be converted.
“The Scottish Government and the council are going to have try to come up to speed on this.”
Asked to assess current demand for office space in Glasgow, Mr Mackenzie said while it is recovering after Covid, it is “polarised”.
“It was polarised previously, but you are just seeing a hyper-polarisation where there are very good properties which comply with corporate ESG (environmental, social, and governance] mandates, and that means they have got everything in them they should, but there are very few of those,” he said.
“And some corporates just cannot take a building that doesn’t meet that criteria. They probably just have to stay put.
“There is significant demand for that but there is only, probably, I would say, two or three buildings in Glasgow just now that meet of all that.
“There is a mid-tier struggling and that mid-tier is peripheral in terms of location or doesn’t meet all the ESG criteria, or both.”
Mr Mackenzie added: “Occupiers have no problem paying big rents, even more so than usual, for slightly less space, if it meets all the criteria, and that includes location.
“Vibrancy outwith the building as well as vibrancy in the building is key – you don’t want to step out into a windblown street. You want to step out into café culture and amenity.”
He added that, while some buildings are unlikely to inspire the level of investment that would attract major corporates, which have to meet the highest ESG standards, they still have an important role to play.
Mr MacKenzie said: “To upgrade some buildings you would have to spend a significant sum of money, and, even then, you are probably not going to produce the final product that would be appealing. Those are the type of buildings where you might just take a step back and split it up.”
Words by
Scott Wright
The Herald
Deputy Business Editor
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