There's a new sound to life around the north of Edinburgh city centre, with the chime of the newly opened £207 million tram extension echoing around the streets. Ferrying locals from Picardy Place in the centre to the coastal town of Newhaven via Leith Walk, the 2.9-mile, eight-stop route is the product of more than three-and-a-half years of work.
Those behind the project hope its opening, dubbed "momentous" by City of Edinburgh Council leader Councillor Cammy Day, will help to breath new life into the wider city area including Leith, a large suburb to the north. Another question is how it will impact Edinburgh's commercial real estate and development landscape.
Steve Jackson, director and Scotland infrastructure regional lead at project managers Turner & Townsend tells CoStar News it was great to see the launch of the tram after its construction was plagued by a series of unforeseen issues, including a 13-week pause due to strict COVID-19 protections.
Jackson, involved in the project since 2014, says the tram's obvious benefits are increasing Edinburgh's transport capacity and getting the city's half a million people to use a greener mode of transport. But he also says the tram line will join up three of Edinburgh's major economic hubs.
"It will open up that job market, so connecting the people of Leith to West Edinburgh, where there is a lot of business development at Edinburgh Park, or into the city centre. It will definitely create the benefit of other people trying to travel to those hubs."
The first arm of the Edinburgh tram service has been running for almost a decade, connecting Edinburgh Airport to York Place. It enjoyed its busiest days ever earlier this year in May as more than 100,000 customer journeys were recorded over two days, when singer Harry Styles came to town.
Although it may be some time before the full benefits of the scheme are felt by those in the city, Jackson says the decision to build the extension has already stimulated residential development along the route, with local agents predicting the sector will continue to profit from the tram's influence.
"When we got the final business case approved in 2019, the next day, or even that afternoon, I had Cala Homes on the phone to me, who had a big development site adjacent to the network. They were waiting to 'hit go' as soon as they found out the tram was going ahead. So as soon as it happened we had three or four parts of those brownfield sites [in Leith] under construction pretty much at the same time as us building the tram."
Cala Home's Waterfront Plaza scheme, a 388-home development which sits opposite the area's Ocean Terminal shopping centre, is one of the developments referenced by Jackson. It also provides small workspace units for retail and offices, having previously been wasteland, and proves how the tram has already had an influence on local development and real estate.
Allan Matthews, BNP Paribas Real Estate's director of agency and occupier solutions in Scotland, says he expects the tram's arrival to have a continued impact on the Leith residential market, with the tram reducing commuting times into the centre and making it a more desirable place to live.
"Leith as a commercial area has been an office location for a number of years, but it's always been talked about as the up-and-coming area. I do believe putting the tram and a fixed linked down Leith Walk, I think that will be a bit of a game-changer for the location. All of a sudden it becomes more connected to Edinburgh, more accessible. I think it might just open things up a bit in terms of views and opinions of Leith as a commercial location."
Matthews, who regularly uses the tram to travel to the airport, adds the Leith office market is well known in the city for hosting creative industries, including The Biscuit Factory, a converted warehouse that now houses 32 businesses and regular events. But Matthews says there are other types of occupiers in the area, including the Scottish Government, which has been based at its Victoria Quay offices, comprising more than 300,000 square foot of workspace, since 2015.
Earlier this week, care at home services provider Call-In Homecare expanded its headquarters at the Sugar Bond building, taking 7,648 square feet of refurbished office space on a new lease from Pure Offices. Matthews predicts the impact of the tram on the occupational market may be slow to take off.
"I think the tram is going to attract more public sector jobs to that location but, in terms of private occupiers, it will be interesting to see if they view Leith in a different way to create an office of substance because, at the moment, they are all quite small operations down in that area.
"Because there haven’t been any major deals done down there, I think it would be hard to say that rents have moved on significantly, just at the moment. I think for the likes of the Commercial Quay development, you are probably looking at mid-to-high teens rent-wise."
He adds: "I don't think things will materially shift in terms of rents in the short term certainly. But I think it will open up the current availability to more potentially interested parties, rather than seeing material rental growth coming through at the moment. In terms of new office development in that location, I'm not totally convinced that is going to happen any time soon."
Savills' head of Scotland Nick Penny says any efficient and cheap transport system will always benefit the area where it's built, as he thinks back to the impact of the first edition of the Edinburgh tram. He agrees the extension could also help to revitalise the Leith office market in the coming years.
"There's an office development down there called Ocean Point, which is next to Ocean Terminal, that has struggled a little bit in terms of its occupancy and its rental growth. But [the tram] should benefit that because there is a stop right next to it, so we should see a future benefit from it from an accessibility perspective.
"My gut feeling is that in the short to medium-term will have a much bigger impact on residential and purpose built student accommodation, rather than be a catalyst for new office development."
Penny also says that the tram is good news for Ambassador Group's Ocean Terminal, a circa 422,000-square-foot shopping centre, which received planning for a reported £100 million makeover last September. Plans for the new centre, built on the former Henry Robb shipyard site, will create a "community-led complex" with housing.
"We had a team day out there a few weeks ago, and we ended up getting a taxi from our office in the West End down to Leith. If the tram was open, we would have jumped on the tram.
"So, I think the tram [will improve] accessing what Leith has got to offer, permanently, as a very attractive suburb of Edinburgh to go and spend some leisure time and have a wonder about around the pubs and restaurants and whatever Ocean Terminal will become."
Looking ahead to the next extension of the tram, which will create a loop back around to Haymarket passing via the Royal Infirmary of Edinburgh and the Edinburgh BioQuarter, a health and innovation district involving the NHS, Edinburgh Council and Edinburgh University, Penny says Leith could open itself up to further development.
"If the tram goes out to that park of town, it will provide an excellent transportation link out from the city centre to Edinburgh's main hospital and also to the health and innovation district, which has got huge potentially but is currently a little bit hamstrung by existing transportation."