Between the lines: No need for a commercial property break – it's time to broadcast confidence

Published on Monday 5 May 2008 21:13

READING the financial pages is enough to make any property developer consider taking a very long holiday and to wait until there are clear signs that the economy has stabilised and reached the cusp of a rebound.

The commercial property sector, in particular, has reached the end of a long bull run, during which values soared as more and more investors, including a growing army of amateurs, clamoured for a share of the seemingly endless rising returns.

Inevitably, the bull run has come to a juddering halt and values have been dropping for some months now, especially in the retail sector, where a combination of high credit card debt and a significant reduction in house sales is hitting trade.

Across all property sectors, values may well slip for a few months yet, while we are being told the turmoil in the banking sector is likely to see the loss of up to 5,000 direct jobs in Scotland's financial services sector, with a similar number in support sectors.

That means we should expect 10,000 jobs to go – just in the financial sector.

What about other sectors? Just how far will this go? No wonder the business community increasingly thinks there is a correction on the way.

As a result, there is talk that some property developers are quietly shelving their plans for major new schemes, preferring to take that long holiday rather than roll their sleeves up and work through the slowdown.

Perhaps I have missed something, but the financial turmoil is mainly focused on consumer markets. It is, after all, being described as the "credit crunch". It is not the business lending crisis. Not yet, anyway, unless we allow that to happen.

We should therefore view gloom on the financial and property pages as a time of opportunity, and, particularly for the commercial property community, a time to lead the way and demonstrate confidence in the value of long-term investment.

Our own business is pressing ahead with the development of the Copenhagen building, a 53,000 square feet Grade A office project on Glasgow's Hope Street.

In Glasgow, there is a shortage of high-quality office space and demand remains strong in the office sector for good quality space in the city centre. Occupiers take a long-term view and I am confident that demand will remain stable throughout this year and well into 2009.

Less than 100,000sq ft of new space will be completed and ready for occupation in Glasgow this year, so Copenhagen's arrival onto the market early in 2009 is timely.

I am also convinced that office rents for quality space in Glasgow will be higher at this time next year than they are now. Current top rents in the city stand at about 27.50 per square foot, but the shortage of supply means that those organisations seeking modern space will have to pay about 30 per square foot to get the quality and the location they need.

The location we have selected has been ignored by developers for a while, but we see great potential in the area just west of Central Station, particularly as rail travel and access to continental Europe improves. Other developers are also proposing major new schemes on Hope Street, Oswald Street and the stretch of Argyle Street to the west of the "Heilanman's Umbrella".

The area is clearly establishing itself as a new office and hotel zone, lying strategically between the traditional city centre business area and the new developments on the waterfront.

This is my first major commercial property venture in Glasgow, which has a reputation as a development-friendly city. I have also been impressed by the work of the city council and Scottish Enterprise in developing the International Financial Services District brand. It has given the city a new image and has already attracted a wide range of top financial companies. From an office developer's point of view, it means that potential occupiers from outside of Glasgow, including overseas, know that they will be locating in a city that welcomes inward investors.

The fundamentals of Scotland's and Glasgow's economy remain robust and the long-term trend is for further economic growth. The credit crunch has been hyped into a wider economic virus. It is not. The commercial property and wider business communities need to focus on what they are good at, and put that holiday on hold.

• Rob Hill is the developer behind the Copenhagen Building on Glasgow's Hope Street.