EDINBURGH'S lacklustre office market is due for a boost amid expectations that two major financial services companies are poised to move to a £50m flagship scheme that has been empty since 2005.
Property sources say Aberdeen Asset Management is in talks to occupy 17,000 sq ft of space at 40 Princes Street, the former C&A building overlooking Waverley Station.
Baker Tilley, the accountancy firm, is also tipped to take 18,000 sq ft in the
same building.
If both move to 40 Princes Street, four of the property's five office floors will be let, delivering a much-needed boost for Edinburgh's office sector.
Several office schemes in Edinburgh have struggled to attract major tenants, while occupation in Glasgow has raced ahead, with a number of high-profile companies moving to the city's International Financial Services District after a slow start.
Number 40 Princes Street building was acquired by developer Redevco, knocked down and a new £50m building constructed in its place. It covers 47,500 sq ft and was opened in September 2005.
AAM and Baker Tilly both declined to comment about moving to the scheme.
If confirmed, the lettings will also be a fresh blow to Waverley Gate, Castlemore's £100m office scheme in Edinburgh which has been empty for more than two years.
Nick Mason, a former director of Castlemore, who is now a consultant with the property group, insisted he has "no worries" about not landing a tenant.
Castlemore describes Waverley Gate, located next to Waverley railway station, as "world-class contemporary accommodation within one of Edinburgh's most significant landmark buildings".
But the building recently celebrated its second anniversary since it was reopened in a blaze of publicity after a £60m refit and has yet to sign an occupier.
Ironically, Aberdeen Asset Management is among the financial services companies which were tipped as potential occupiers and several law firms have considered moving in over the last 24 months, but so far, none has followed up with firm interest.
Law firm Maclay Murray & Spens confirmed last week that it would snub the scheme and move to the £350m Quartermile scheme on the former Royal Infirmary site.
Mason insisted the Edinburgh office market has picked up after a period of stagnation and said more companies were looking to move to the capital. He added: "Nothing has gone wrong. There hasn't been a market until the last few months."
Timing the construction of office schemes to meet tenant demand is notoriously difficult. Mason said: "Sometimes you get it right and sometimes you get it wrong. It's only in the last few months that you are starting to see movement in the market."
But property sources say the building is not letting because it is in the "wrong end of town", with corporate occupiers preferring the so-called Exchange district in the West End and nearby Fountainbridge.
Mason said: "There was a shift 10 years ago to the Exchange and certain parties want to stay in that area. That's property for you. I have got no real worries."
Agents for the building are touting space for around £28.50 per square foot, but rival agents say that is too much. Maclay Murray & Spens is understood to be paying a basic rent of £26.50 a sq ft at Quartermile. Mason said Waverley Gate's pricing was right, adding: "It's not expensive - it's in line with the rest of the market."
Asked whether he was concerned about going two years without a tenant, he said: "Two years is not unknown. If you look at the Thames Valley, there are buildings that have been empty for three or four years."
