Will shrinking employment dent the shortage of office space in Scotland?

An economy that is “close to stalling”, as S&P Global describes it, will inevitably impact the commercial property market in a variety of ways. However, there are good reasons to believe the blowback on the office sector in Scotland’s two largest cities will be less intense then elsewhere.

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The first comes down to the type of private sector companies that are shedding jobs most prolifically. Those with the largest workforces, such as major retailers and hospitality providers, will be shouldering some of the biggest costs when the new tax increases come into effect in April.

Many of the financial and professional services providers at the forefront of demand for prime office space in Edinburgh and Glasgow also employ large numbers of people on salaries that tend to be above the average in other sectors such as retail. 

With the level of employers’ national insurance contributions linked to the amount an individual is paid, the burden will admittedly be higher per head of staff for these organisations. That said, any major retrenchment on jobs will more likely be dictated by whether the broader loss of consumer and business confidence tips the wider economy into a prolonged recession.

The second and most significant reason there is less to fear in the Scottish office sector is the lack of new energy-efficient workplaces that employers are seeking in continuing efforts to repatriate staff from home working. This fundamental element of supply far outweighs any potential decreases in demand currently on the horizon.