ABERDEEN has enjoyed a surge in office lettings in the first half amid signs the recovery in the key oil and gas market is becoming firmly established.
Property adviser Savills said 52 deals completed in the six months to June compared with 30 in the same period last year as the city felt the benefit of the recent increase in the crude price.
The rise in activity reflected a dramatic improvement in sentiment in the oil and gas industry, which hit rock bottom amid the fallout from the crude price plunge that started in 2014.
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Savills director Dan Smith noted that following three years of retrenchment in the industry many Aberdeen oil and gas firms are eyeing expansion. This reflects the widespread expectation the crude price will remain at levels at which firms can make plenty of money.
“We have been through a pretty torrid time over the last few years with the downturn in the oil and gas industry which buoys the Aberdeen market. Most of the companies in that sector were going through rationalisation” said Mr Smith.
“Now we’re in a position where most of those companies are talking about upscaling and recruitment as opposed to downsizing and redundancies.”
The Savills report comes after a series of mergers and acquisitions involving North Sea firms and assets provided evidence that oil and gas firms and financiers have rediscovered their enthusiasm for investing in the area.
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Savills said key deals in the first half included North Sea-focused oil and gas firms Ping Petroleum and Verus Petroleum taking space.
Verus and the CATS Management pipeline firm took space in the landmark Silver Fin building at a record rent for Aberdeen of £32.50 per square foot.
The first half property market activity provided further evidence the effects of the recovery in the oil and gas market are rippling through the Aberdeen economy.
“Other sectors are improving off the back of the oil and gas sector,” said Mr Smith, who noted professional services firms such as accountants and lawyers were among the obvious beneficiaries.
Accountancy firm Grant Thornton took space in the Silver Fin building in the first half.
Glasgow-based engineering giants Weir and Aggreko have this week reported strong growth in sales partly driven by increasing activity in global oil and gas markets.
Read more: Aggreko shares surge as profits at generator firm beat expectations
Mr Smith noted that buoyant start up activity in Aberdeen has driven strong demand for space in serviced offices.
The rise in start ups may reflect moves by people who left the oil and gas industry amid the downturn to put the skills they acquired in the industry to work in another context.
Aberdeen has also benefited from investment in major infrastructure projects such as the peripheral road and new conference centre and from efforts to help broaden the area’s economy.
Savills said the 52 first half deals covered 180,000 square foot in total.
First half lettings in 2017 covered 240,000 square feet. More than half of that total was accounted for by two deals, which involved oil and gas independent Chrysaor and industry giant Total taking space.
“This year we are seeing a far greater number of occupiers looking to relocate and take-up has been characterised by a larger number of smaller deals,” said Mr Smith. “It is our view that a market with greater churn is a healthier market; one which is characterised by greater stability, and is less susceptible to fluctuation.”
In May Savills said the oil price recovery and major infrastructure projects were boosting Aberdeen’s hotels sector. amid a resurgence of investor demand and the arrival of new hotel operators.
Savills predicted hotel revenues would move into positive territory in the second half of 2018 for the first time since 2014, on the revenue per available hotel room measure (RevPAR). Revenues slumped following the oil crash, hitting a low in the first quarter of 2016.
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