The latest bi-annual review from consultants Ryden said the prospect of a second independence referendum and next month’s general election had made some investors “pause for thought”.
“There is no doubt the ongoing political uncertainties are influencing the market and overall investor appetite,” the report says, although it also points out that the weak pound is continuing to see overseas investors active.
Ryden partner Dr Mark Robertson said the “only certainty seems to be political uncertainty at least for the foreseeable future” as Brexit negotiations continue.
“These are uncharted waters and it is impossible to predict how this will affect the property market over the long term,” he said.
Although the fact that investor sentiment recovered relatively quickly after the initial shock of the EU referendum has given grounds for optimism that Brexit will not directly have a major impact on investor demand, the report notes that it may lead to a second Scottish independence referendum.
Based on the experience of 2014, the report predicted that would be likely to limit demand from those “cautious investors who prefer to sit on the fence”.
Ryden’s 80th Scottish Property Review says Edinburgh’s office market remained “robust” over the period, with a number of high-profile relocations adding to pressure on supply at a time when there is little new office development. Continuing strong demand from the technology sector saw it account for 26 per cent of overall take-up across Edinburgh, with deals including FreeAgent, STMicroelectronics, intelligentpos and Cirrus Logic.
Although the report describes the Glasgow market as being relatively subdued over the past six months, rising oil prices are filtering slowly through to the property sector in Aberdeen, with office supply showing a rise of 7 per cent in the past six months.
In the industrial sector, the report notes that there has been a boost to rentals of smaller units through the small business rates relief initiative, However, the sector also faces headwinds in the form of slower economic growth and political uncertainty, on top of factors including the recently reduced vacant industrial rates relief.
In the retail sector, prime rents across Scotland’s top 20 locations have stalled again following a number of rises last year. Despite sales growth continuing through 2016, consumer confidence has fallen and like-for-like expenditure is now following suit, as rising inflation, limited wage growth and rising household debt take effect, the report points out.