Commercial property: Call for creation of more office space

The current uncertain political climate means that firms are being starved of suitable office developments in Scotland's economic centres, as investors exercise caution due to Brexit uncertainty, according to Colliers International.

Research presented at the commercial property firm’s Scottish Economic Breakfast Briefing last month showed that the country’s businesses have weathered recent political storms well, suggesting that further growth is possible next year and that the nation’s prime office space will remain in high demand.

Activity was only slightly affected by the independence referendum in
2014 and the latest GDP figures suggest Scottish firms recovered better than their English peers from the shock of the Brexit vote in 2016.

Patrick Ford, a director in Colliers International’s growing capital markets team in Scotland, said that the last 12 months had seen soaring office demand in Glasgow in particular, where major office deals in financial services and the public sector meant property activity for 2018 was set to be double that seen in recent years at more than one million square feet.

However, Ford added: “Although there is every indication that demand for premium offices will continue into next year – there are several large companies specifically looking for space – it is another matter to persuade developers and investors to make a move at this time.

“It’s unfortunate, as this should be a time of real opportunity for the city, with many key sectors and employers looking to beef up their presence, to take advantage of the skilled workforce, good communications and other advantages Glasgow offers.”

In a major sign that the city’s economic strategy, aimed at nurturing key sectors such as financial services, is working, Glasgow has seen large offices sold or leased to HMRC, Barclays and Clydesdale Bank in recent months.

JP Morgan is said to be among other organisations looking for new premises in the city.

With demand matched by strong investor interest, Colliers has strengthened its capital markets capability in Scotland, with the recent executive appointment of an experienced advisor, Elliot Cassels, following Ford’s arrival at the firm in June last year.

The latter maintained that investor interest in Scotland remains strong, especially from overseas investors, who are capitalising on the current low level of sterling.

However, Ford also believes that, in common with developers, investors are inclined to wait and see what happens with Brexit.

He also flagged up the additional risk presented by the possibility of a second Scottish independence referendum, which he says has not disappeared but has been diluted in the midst of Brexit.

Ford said: “It’s very encouraging to see such healthy demand from major employers and value creators in the city, but business needs space to grow.

“Rents are under upwards pressure and in theory that should help, but we need to see cranes on the skyline.”

Beyond Glasgow, Colliers points to further encouraging signs for Scotland’s economy. Figures from the December briefing highlighted the fact what really fires demand for Scotland’s goods and services is the price of oil, which has strengthened significantly in 2018 compared with the previous two years.