- What £28m Edinburgh office comes to market
- Why Spec redevelopment potential in a market starved of supply
- What next Expected to be a busy sales process
The constrictions that Edinburgh’s city centre’s office market operates within have been well-publicised of late, but an office for sale on a prime piece of real estate is sure to get investors and developers jockeying for position on what could be a prime speculative redevelopment play.
AXA Real Estate IM is selling 3-5 Morrison Street in the heart of Edinburgh’s historic centre, with the investment manager looking to receive offers around the £28m mark, according to several sources in the local market.
Ryden has been appointed to oversee the sales process. The building is located in Edinburgh’s Exchange District, a prime office destination. It is an 82,000 sq ft five-floor building which includes 57,000 ft sq ft of office space. It also incorporates a 5,000 sq ft ground floor retail unit and an adjacent 20,000 sq ft four screen cinema.
AXA’s disposal is poised to ask some interesting questions of a city centre that is tightly constrained by its surroundings and the planning restrictions that accompany being one of the most aesthetically pleasing cities on the eye – and a tourist hot spot.
The building is majority let to Franklin Templeton, the global investment firm headquartered in New York, but it is widely assumed in the market the firm will be exiting the property after its lease event in 2021. The investment firm currently has a 50,000 sq ft requirement circulating the market, and React News understands it is nearing the end of that process with a firm, but short shortlist now in place. The Odeon cinema is also a tenant within the building.
Spec redevelopment play
With the headline tenant expected to exit, an acquisition must be considered a redevelopment play with the building located in the financial and professional services heartland of Edinburgh. As one agent told React News, “it is a great site, but the sale is further up the investor risk curve because it is essentially a £28m spec redevelopment opportunity. That being said, it works and I don’t expect it to be short of runner and riders.”
Prime rents in Edinburgh, which continue to be driven up by a lack of supply in the city centre, are now passing £35 per sq ft. Supply in Edinburgh city centre has been on a downward trend since 2009 and is now at an all-time low, with many estimating it to be around 3% for Grade A stock.
AXA REIM acquired the building on behalf of its Caesar Fund for £29.65 million from Climate Change Capital, the environmental asset management and advisory group. The closed-end Caesar Fund was launched by AXA Real Estate’s Italian regulated subsidiary AXA REIM SGR with a first close of €118 million in March 2012 and raised €209 million at its second close in October 2012.
All parties declined to comment.