COULD the sale of a prime retail store in Glasgow signal the beginning of the revival of the Scottish commercial property investment market?
All the right ingredients are there – a number of bidders competing with each other, a price which, in the circumstances, keeps everybody happy, a good yield, a sound tenant and an agent who sees more such deals on the way.
The sale was by Invista
REIM – represented by Cushman & Wakefield – of the building at 70/76 Argyle Street and 2/10 Queen Street to a private investor for £9.45 million, reflecting a net initial yield of 7.25 per cent. Bottom of the market price? Difficult to call, but since mid-2007 it is reckoned that prices have fallen between 40 and 50 per cent.
The property has around 16,320sq ft, over ground, basement, first and second floors. The Next Group has a lease on it until February 2022. The current annual rent is £725,000, subject to rent reviews in December 2011 and five-yearly thereafter.
Glasgow-based John Hamilton of Cushman & Wakefield said "This investment was sold ahead of the asking price in less than two weeks and demonstrates that even in the current market there is very good demand for prime shops of this sort of lot size, let to good covenants, on long leases.
"At the outset there were around 40 inquiries and this boiled down to about seven serious interests. The interest is largely coming for investors looking at sub-£10m or, more so, sub-£5m, with a good tenant and a decent length of lease.
"There are a number of small property companies in the UK who have been keeping their powder dry and have come into the market now because they see it as very close to the bottom.
"This has also been evidenced in similar transactions elsewhere in the UK, where private investors with cash reserves have been among the most active buyers. Notably prime high street property let to banks is proving particularly attractive to such investors and is commanding much sharper yields."
The irony is that these cash-rich investors are anxious to get their money out of the banks because of poor returns as a result of low interest rates – but if banks are tenants of the buildings they are targeting that makes them even more attractive.
In a gloomy report last week, the Royal Institution of Chartered Surveyors said that all sectors remain firmly negative and Graeme Hartley, RICS Scotland director, said the investment market continues to see declines in transaction activity.
While it was still too soon to point to an end in price falls, deal activity should be picking up by the end of the year as those with deep pockets moved in.
Given this backdrop for the sector and expectation of further rises in vacant space, the RICS is disappointed that the government failed to address the issue of empty property rates in the Budget.
Hartley added: "This is encouraging the demolition of perfectly good buildings, discouraging speculative development and could result in more far-reaching problems when the economy starts to pick-up again."
What many commentators do not point out – or maybe don't know – is that empty property rates do not apply in Scotland, so such buildings are not being demolished this side of the Border.
David Melhuish, director of the Scottish Property Federation, says that empty rates is a "very negative" issue south of the Border only.
However, he adds: "But it is, of course, an issue for many investors and property companies based in Scotland who have major interests in England."
Council forms a bond with new siteIN THE biggest letting so far this year in Scotland, East Ayrshire Council has agreed to take 55,000sq ft in the former Johnnie Walker bonded warehouse which was bought by Alchemist Estates for £650,000. As part of Kilmarnock town centre regeneration, the firm converted the run-down property into a 70,000sq ft site which, with two other tenants, brings in an annual rent understood to be more than £500,000.
REGENERATION specialist St Modwen has secured buyers for half the space at its speculatively-built Pegasus Court industrial development in Hillington, Glasgow, with the sale of a 15,000sq ft distribution unit to water engineering company Barr & Wray. It was for an undisclosed sum but £80 per sq ft had been quoted. Pegasus Court is within the Pegasus Business Park which St Modwen bought from Rolls Royce 2006. Atisreal and Colliers CRE acted for St Modwen, with Ryden for Barr and Wray.
THOMAS Gunn Navigation Services, international admiralty chart agent, is moving to larger premises in an Aberdeen industrial estate and has put its current premises, Anchor House at Regent Quay, on the market. Graham & Sibbald negotiated a lease on an 11,000sq ft unit in the Miller Street Industrial Estate at £70,000 a year. Agents for the landlord, the Fix-UK Partnership, a London-based fund, were FG Burnett and Montagu Evans.
ANOTHER tenant for the renovated and restored Stamp Office on Waterloo Place in Edinburgh – global medical research company Chiltern International has taken a ten-year lease on 7,583sq ft at £118,745 a year. Eric Young & Co and Jones Lang LaSalle acted for the Stamp Office, with James Barr for Chiltern.
THE former Kwik Save store site at Titchfield Street, Kilmarnock, has been bought by Aldi following the administration of Pettifer Estates. SGM Property Consultants represented KPMG in the transaction, with Alan Whyte & Co for Aldi, and the purchase price is believed to be around £1.6 million.
A GERMAN couple who have been looking for the past 18 months to move to the UK to break into the UK retail sector have picked an out-of-the-way spot to make their debut. They have bought Tagon Stores, trading for 70 years as a general store and fuel station, in the village of Voe on the Shetland Islands, for an undisclosed sum off an asking price of £85,000. Agent Christie says there was considerable interest in the property.
• Send deals details to jimdow@lumison.co.uk
The full article contains 1035 words and appears in The Scotsman newspaper.
