Edinburgh’s economy could lose £800m because it does not have enough office space for small and medium size businesses.

According to DTZ, the supply of Grade B office space, the type of space normally taken by SMEs, is drying up.

Small to medium sized enterprises (SMEs) are worth £8.8bn to the Edinburgh economy, equivalent to £100,000 a worker, and the sector grew by 10% last year.

DTZ said since autumn 2007 the stock of Grade B space had declined by 29%.

Drying up supply

‘We are at risk of losing the significant growth from SMEs because Grade B supply is drying up,’ said DTZ economist Richard Marsh. ‘While SMEs have underpinned Edinburgh’s growth, we are now facing the problem of not being able to accommodate this growth and the effect is this lucrative market is being stifled.’

DTZ said that much of the Grade B space that is available was either under offer or in need of major refurbishment.

Two years left

‘Demand for Grade B space in the city centre is outstripping supply and occupiers are being left unsatisfied,’ said DTZ senior surveyor Peter Fraser. ‘There is only around two years of stock left in Edinburgh and as a result of this shortage, we are increasingly receiving enquiries from SMEs for Grade A accommodation.

‘However, the jump in rent of between £5-£10 per sq ft above Grade B space is proving a step too far for many of these companies.’