Experts pin hopes on English office deal

A CHINK of light has emerged in Scotland’s embattled office property market after a major speculative scheme in the heart of Manchester, which is being backed by institutional money, was given the go-ahead.

Property experts believe the green light for the 12-storey project – the first large-scale scheme of its kind to take place outside London since the recession – could convince banks and pension funds to back much-needed speculative developments in Edinburgh and Glasgow. Both city centres have seen no such new builds in the last three years after institutions took fright.

The lack of funding for speculative projects – where the buildings are not pre-let or pre-sold – is highlighted in the 69th biannual Scottish Property Review, published by Edinburgh-based consultancy Ryden.

The study, which is due to be posted out to clients this week, details every major office, retail and industrial letting and investment deal over the past six months. It is seen as a trusted benchmark of the Scottish marketplace.

Mark Robertson, Ryden’s head of consulting and author of the report, said: “Institutional funding has yet to materialise for speculative projects and in turn it is apparent that certain markets will confront a supply shortage in the short to medium term.”

The report described banks’ approach to new business as “very cautious and extremely selective”, noting that funds were generally restricted to pre-let schemes.

Pointing to the St Peter’s Square development in Manchester, which is backed with pension fund money, Robertson suggested it could act as a catalyst for the Scottish market.

“Fingers crossed that we now see similar activity in Edinburgh and Glasgow,” Robertson told Scotland on Sunday. “This could be a catalyst for the institutions up here.”

The limited supply of “grade A” offices in Scotland’s two biggest cities was again touched on in the latest review. Ryden forecast a further tightening in the supply chain in Edinburgh over the next 12 to 18 months.