Battered office rental sector holds ground

Published on Monday 10 May 2010 19:01

OF THE three main letting areas of commercial property, the office sector is believed to have suffered most in the current financial crisis.

Yet looked at from a historical perspective, offices have been holding up well, according to the latest Scottish Property Review from Ryden, which says that sales and lettings are running at around 75 per cent of the long-term average.

Dr Mark Robertson, the report's author, said: "This is a pretty remarkable statistic. Office sales and lettings are no worse than they were during the last recession in 1993 despite the emphasis on banking and financial services this time round."

Also encouraging was that, while public-sector requirements underpinned the market in Glasgow during 2009, large private sector deals were achieved. The city's vacancy rate is 17 per cent but falls to 12 per cent in the city centre (3.6 per cent for new-build).

Relatively large lettings in Edinburgh have included the take-up by NHS Lothian of 40,000sq ft at Waverley Gate and 38,000sq ft by Wood Mackenzie at Exchange House in Semple Street – although the biggest "Edinburgh" letting of all was just outside the city at Shawfair Business Park, where the Scottish Qualifications Authority took just under 55,000sq ft.

Helping to bring a measure of relief to the market in Edinburgh has been the take-up of smaller modern floor plates.

"Town houses' leases signed in the 1970's have started to expire and landlords have responded by offering competitive packages," Robertson said.

Meanwhile, if there is some hope for optimism across most of the office sector, retail has clear winners and losers and for the latter it is not looking good.

Robertson has in mind once-bustling market towns which have been badly affected "over the long term by a move to city centres, regional shopping centres and superstores", with Kilmarnock and Paisley among two of the most badly affected.

Indeed, some market towns could be approaching the point of no return. "In some cases the problem will be short-term and a return to economic growth will eventually deliver better times," Robertson continued. "But in other high streets there is now a pressing need for landlords to seek to diversify."

Ironically, market towns that are some distance away from the centres of population – either physically or psychologically, (e.g. Perth, Stirling and Dunfermline), are performing better than some that have to compete with Glasgow and the likes of Braehead and Silverburn.

Buchanan Street in central Glasgow is still bucking the general retail rental trend, being "arguably" the only thoroughfare in Scotland to show positive sustainable rental growth. It is also currently fully occupied.

'Project of the year' is a dram good winner

ROSEISLE Distillery in Moray has been named Scottish Building Project of the Year 2010 by the RICS in Scotland.

The 40 million distillery was the first to be built in Scotland in 30 years and is also the largest-ever (32,000-plus sqft). The energy generated by the distillery's 14m biomass plant (a separate project) is used to generate the steam that charges the stills and a water reclamation plant recycles liquid for potable water.

The project's quantity surveyor, Summers Inman, entered Roseisle Distillery for the awards which celebrate the best new buildings, redevelopments or conservation projects in Scotland across four categories: sustainability, building conservation, regeneration and community benefit.

Last month, the distillery scooped the sustainability category award in the RICS Scotland awards and then battled it out against the three other category winners for the title of Scottish Project of the Year 2010 – North Glasgow College (community benefit), The Old Schoolhouse in Logie (building conservation) and Maxim Office Park in North Lanarkshire (regeneration).

Winners will automatically enter the RICS global award finals, facing tough competition from all over the world.

Runners-up in the various sectors were as follows – Sustainability: Active Renewable Centre, Aberdeen (commended). Building conservation: Tournament Bridge Restoration, Irvine (highly commended). Regeneration: Union Square, Aberdeen and IFSD Glasgow (both highly commended); Ravenscraig Phase One, Ravenscraig (commended). Community benefit: Raploch Community Centre Campus, Stirling, Budongo Trail, Edinburgh Zoo and alteration to St Paul's & St George's Church, Edinburgh (all highly commended); West Lothian Civic Centre, Livingston and Pollok Civic Realm, Glasgow (both commended).

MONKEY BUSINESS FOR STRANDED AGENT

AT LEAST two senior property agents in Scotland were among UK travellers trapped in foreign climes as a result of the recent Icelandic volcano eruption and, coincidentally, both share the surname, Smith – Doug, head of Scottish operations for CBRE, and Fraser, senior partner at Smith Cole Wright in Glasgow.

In the case of Smith, D, the crisis led to an extended stay of a week at the Sun City resort in South Africa but his children's joy was tempered somewhat by the fact that their father managed to arrange for homework to be e-mailed to them (spoilsport). Somewhat disconcertingly, his one business call to Scotland was interrupted by a monkey attempting (and almost succeeding) to break into his hotel room via a patio door.

Smith, F, was more fortunate in that although even further away from home, in Thailand, he began a three-week holiday as the crisis broke so his scheduled return was delayed by only two days. And as Smith F was "trapped" in the Bangkok Hilton, like his namesake, he wasn't exactly complaining.