Scotland | Moving Forward Together

The outcome of the Scottish Independence Referendum, whilst committing the country to remain in the UK and having removed a degree of political and economic uncertainty, has yet to bring the commercial property upswing, particularly in the investment markets, that many anticipated.
Albeit the indications are positive for 2015 Scotland, and the market, waits to see how increased levels of political power will be devolved and implemented.
Scotland’s economy has shown growth at levels equal to or exceeding those in the rest of the UK, demonstrating a balance between consumer demand and business investment. Falling unemployment figures show business confidence to invest in staff resources for the future.
Many elements of the economy have exceeded or regained pre-recession levels. The strengthening economy brings with it a confidence and optimism for the coming years.

Watch the space in business rates

Property occupiers in Scotland were dealt a severe blow in respect of reducing Rateable Values on the grounds of Material Change of Circumstances (MCC) appeals following the Lands Valuation Appeal Courts decision in a landmark case led by Schuh (and other retailers) in Sauchiehall Street, Glasgow. There is now a considerable difference between Scotland and England in being able to secure MCC reductions on the grounds of falling rental levels between Revaluations. Given the harmonisation in Uniform Business Rate levels it is vital that urgent legislation be put in place to rectify the previous status quo. Colliers’ Rating team is working closely with its clients to secure the best possible outcome and are actively lobbying the Scottish Government to secure urgent legislative change.

Retail consolidating

In common with the rest of the UK over the last year, Scotland has seen consolidation of the slowly improving retail market. In particular landlords are increasingly introducing food, beverage and other leisure elements to existing schemes or locations as a method of increasing dwell times and boosting spend. New cinema developments are planned or under construction at Silverburn Glasgow, Wellgate Centre Dundee and Edinburgh Fort. These follow the successful opening of the Vue Cinema Glasgow Fort in 2013.
The polarisation of the retail property market continues with well located, right-sized stores continuing to attract retailer interest, whilst poorer locations and awkward store shapes remain difficult to let. Most retailers are generally looking to attract the same number of shoppers from a smaller number of larger stores to tie in with their multi-channel retailing operations.

Industrial needs shifting

In the West, Glasgow and Lanarkshire remain the prime hotspots with demand centred on the M8 and M74 corridors in areas such as East Glasgow, Bellshill and Eurocentral. Demand in the East is focussed around West Lothian and Newbridge with Aberdeen remaining strong as demand continues from oil and gas industries.

The majority of demand continues to be focused at the lower sub-10,000 sq ft size range. However, buildings of 30,000 sq ft and above have witnessed a sharp increase in activity.
Speculative development continues to be extremely limited. Accordingly, we predict that “build to suit” pre-let/sale activity will become a more common feature of the market going forward to satisfy demand for modern buildings.

Office building up

The Scottish office market is showing strong signs of recovery with increased levels of demand across Glasgow and Edinburgh. Both cities have significant speculative development schemes underway with substantial pre-letting activity demonstrating increasing confidence. 2015 will see the practical completion of a number of significant developments including 110 Queen Street (part pre-let to Brodies/Deloitte), 1 West Regent Street (Weir Group have taken circa 40,000 sq ft) and Abstracts St Vincent Plaza. Refurbished Grade A schemes such as 151 St Vincent Street and George House have had excellent letting and subsequent investment success in 2014 when Grade A availability was limited.

Aberdeen continues to show strong signs of activity and significant new developments, such as the second phase of Prime 4, are underway on the back of further pre-letting activity. As the oil price continues to contract, occupier business activity in the region may have to adapt accordingly.

Urban regeneration

Clyde Gateway Urban Regeneration Company (URC) is tasked with regenerating 2,000 acres to the east of Glasgow City Centre. The 2014 Commonwealth Games, hosted in this area, helped to showcase £1.5bn of investment to date on improvements to the built environment and transport connectivity. Last year also saw the completion of The Albus (20,000 sq ft office), various site sales and lettings, all of which demonstrate the market’s interest in this area set to become a competitive hub of commercial business activity. Clyde Gateway has secured the largest planning consent in Scotland anticipating a mixed-use development of 1.3m sq ft incorporating offices, hotel and ancillary retail on the Shawfield site. Opportunities exist for both developers and occupiers who buy in to the vision behind this extensive development area.

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