Outlook for Scotland’s Commercial Property Markets
29 April 2010
Scotland’s property markets offer mixed prospects for recovery according to Ryden’s 66th Scottish Property Review.
Dr Mark Robertson, editor of the report, said: “Activity in the occupier markets continues to be affected by the recent recession. The investment market bottomed out in 2009 and thereafter enjoyed a sustained recovery at the prime end of the market.”
Economy
The UK recession has ended but growth is marginal. Scottish data confirms a similar trend. Forecasts anticipate slow growth in the UK and Scotland in 2010 followed by a gradual recovery to trend growth through 2011 and 2012.
Offices
Demand for offices in Scotland’s major cities continues at reduced but steady levels. Sales and lettings are running at around 75% of the long term average. This resilient performance during a recession is bolstered by larger deals in Glasgow and an active market for smaller open-plan offices. A lack of new development is expected to put a floor under the market, positioning the office sector for recovery as economic growth resumes and unemployment peaks at a lower level than had been forecast.
Industrial
The industrial property market’s recession has been comparatively short and shallow, particularly in the West of Scotland. Transactions in other locations have been smaller but still steady. The prospect of market recovery including rental performance and investor interest is encouraging developers in some locations to begin to prepare proposals for new industrial schemes.
Retail
The retail sector’s recession began well before the economic downturn and continues afterwards. Consumer expenditure has held up reasonably well, but is skewed towards food sales and regional shopping centres. This leaves many established towns at the mercy of weak retailer demand and rising vacancies. Rental value decline remains latent in many centres due to lack of transactional evidence.
Investment
Scottish commercial property recorded a total return of 2.3% in 2009 (UK:3.5%) according to the IPD Annual Index. Statistics reflect a year of two halves with the market bottoming out by Q2 2009 and thereafter enjoying a sustained recovery fuelled by the weight of un-leveraged money seeking property investments.
