Edinburgh and Glasgow ‘to enjoy rental growth’

EDINBURGH and Glasgow are set to buck the UK trend in the commercial property market this year as two surveys show the take-up of relatively under-supplied prime units is increasing.

A survey by accountant Deloitte predicts “significant rental market growth” in 2013, while property agency Jones Lang LaSalle said it was seeing increasing demand for prime industrial units while supply was falling. Deloitte forecasts that commercial rentals will grow by 7 per cent in Edinburgh and 5 per cent in Glasgow this year.

Alasdair Ramsay, partner and head of Deloitte Real Estate in Scotland, said: “Glasgow is one of the first regions outside of London to see any new development activity, which provides some reason for optimism for the next 12 months.

Hide Ad
Hide Ad

“Those willing to build speculatively, and in the right location, could be well rewarded as they deliver into a relatively under-supplied market. Unless more developers are willing to take this risk, however, the rent on Grade A property will be driven ever higher – with a 3.5 and 4 per cent increase forecast for Glasgow and Edinburgh respectively by the end of 2013.”

The legal and financial sectors are likely to lead occupational demand in Glasgow, while Edinburgh has scope for hotel and student housing conversions, according to the research.

Both cities saw a strong rise in take-up of rented property last year. In Glasgow, year-on-year investment volumes were also up, with completed deals worth a total of £152 million. A large proportion of that total was made up by the sale of One George Square for £60m. Ramsay said it was “the most positive picture we have been able to paint for Scotland in some time”.

He went on: “With positive rental growth and the embers of recovery in Glasgow’s development market, we could well be looking at an even more positive picture come this time next year.”

Jones Lang LaSalle’s latest UK industrial property trends report found that take-up in Scotland involving units of 100,000sq ft or more was four times higher last year than in 2011. Total available floorspace changed little. The available supply of units below 100,000sq ft north of the Border shrank by 2.1 per cent between September and the year end.

Neil Cockburn, lead director of Jones Lang LaSalle in Glasgow, said this year had started positively in terms of inquiries and transactions. “Prime city centre and key strategic locations around Glasgow and Edinburgh are still seeing an increase in take-up,” he said.

The growing case for building more commercial units comes as the latest purchasing managers’ index (PMI) of the UK construction sector showed that it shrank for the fifth month in a row in March.

The Markit/Cips PMI inched up to 47.2 from 46.8 in February, holding below the 50 level that separates expansion from contraction and slightly undershooting forecasts for 47.5.

Markit said that unusually cold weather combined with sluggish underlying demand kept a lid on construction work.