Forecasting the future is not the easy option

Published on Monday 7 September 2009 18:58

THE worst might be over for the retail sector in Scotland, according to one agency… the investment market in Scotland might be turning the corner, says another… but, warns a third, turning points are notoriously difficult to predict.

It's research and seminar time for the agencies, and the words and views have flowed all week, at a time when one major Scottish institution heavily into property is believed to have issued an internal office edict banning the use of the words "green shoots".

The retail optimism is provided by Cushman & Wakefield, which says Scotland's retail decline is showing signs of stabilising.

Its quarterly analysis of the availability rate of shops in the UK's prime retail areas in 35 towns finds that the number of retail premises available for rent in Scotland has remained fairly static at 15 per cent over the past three months.

While this compares unfavourably with the national average of 12.6 per cent, Scotland is no longer top of the availability league, with outer London, the south-west of England and Wales showing the highest levels, at 17.7 per cent each.

Stuart Moncur, Cushman & Wakefield's head of retail in Scotland, says the worst may well be over for the retail sector in Scotland. He states: "In the first half of 2009, Scotland was very exposed to business failures, with large Scottish-based companies, like USC and Original Shoe, going into administration.

"However, the market has stabilised over the summer and retailers are hoping that confidence will return over the next six to 12 months as a result of the more positive messages emerging from the economy.

"An increase in mortgage lending and the news that those with mortgages have more disposable income than last year all help to reassure people more stable and prosperous times will return."

He added: "The Christmas period is always key to the overall performance of retailers, many of whom will be anxiously waiting to establish whether customer confidence is going to return."

On the investment side, CB Richard Ellis (Scotland) reckons it might be turning a corner.

Keith Hutchison, director, professional services, puts it this way: "There were signs in Q2 that some confidence was returning to the investment market, and there has subsequently been some yield improvement in July and August for prime, well-let product and for certain subsectors, including retail warehousing.

"This has been driven by increased demand from investors, particularly some of the institutional funds now seeing net cash inflows, together with a realisation that the banks are not 'forcing' as many sales as anticipated, and therefore yields are unlikely to go much higher. This has led to some competitive situations at closing dates."

At a seminar in Edinburgh last week – the first of many it will hold in the UK – BNP Paribas Real Estates looked far ahead and predicted that UK capital values will rise 33 per cent and the total return will be 100 per cent over the five years to 2014.

The forecasts, put together quarterly, looked at capital values, total returns and rental growth for 2009 to 2014 and painted a picture of a slow but definite recovery for the UK commercial property market.

Keith Steventon, the head of research, said turning points were notoriously difficult to predict, and he added: "There is always a risk, and this is that the economic recovery everyone is looking towards is not sustained, and this brings any burgeoning property recovery down with it. Without any other economic recession to compare like with like, it really is unknown territory. However, all the signs are 'so far, so good'."

Hermiston Gate goes on the market

TWO large deals that are on the cards will give the Edinburgh commercial property investment sector a major boost. The sale of Hermiston Gait retail park is at the legal due diligence stage, CBRE selling it for Invista with the starting price above 63 million. Twelve written and three verbal offers have been received.

An announcement is imminent on the sale by DTZ on behalf of the Crown Estate of New Uberior House – HQ of Bank of Scotland corporate – for about 50m. Andrew Cartmail, senior director in Scotland of BNP Paribas, says: "This is the prime end of the market where demands exceeds supply. There are parties wanting to enter the market but not enough willing to sell at current prices."

IN ONE of the biggest industrial lettings in Scotland this year Malcolms Logistics has taken 115,000sq ft on a flexible lease at 3.25 a sq ft at Glasgow's Westway, with Jones Lang LaSalle for the landlord, a joint venture between the Moorfield Group and Westbrook Partners.

WATKINS Hire & Cabin Centre, part of the Welco group of companies, has chosen Falkirk for its first Scottish location, taking a sub-lease from Ashtead Plant Hire on 10,900sq ft of industrial space at the Burnbank Industrial Estate at an annual rent of 49,500 (4.40 a sq ft). King Sturge advised Watkins, with Lambert Smith Hampton for Ashtead.

RIVER Island is to open a flagship store in the 162,000sq ft Kingsgate Shopping Centre in Dunfermline, relocating from the town's High Street. It is taking 5,950sq ft plus a mezzanine on a ten-year lease at an undisclosed rent. Cushman & Wakefield, Eric Young and BC Commercial act for the landlord, Crossland Properties.

FORMAT outdoor advertising company APPS has taken a ten-year lease at 22,500 a year on 5,000sq ft at the City Park Industrial Estate, Glasgow, and is moving from Cambuslang. King Sturge advised the landlord, Bankhead Estates.

OPTICIAN Black & Lizars has taken a nine-year lease on 80C George Street, Edinburgh, on a stepped rent which starts at 70,000 for the first year. SGM Property Consultants and Jackson Criss acted for the landlord, NFU Mutual Insurance Society.

THE Bridal Studio, represented by Ditchfield Property, has taken a 35,000-a-year lease on 3,619sq ft of basement and ground floor at 22 Montrose Street, Glasgow. Spiers Gumley acted for the landlord, one of its private investor clients.

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