Property market ‘as polarised as ever’

SCOTLAND’S property market is the most polarised it has been for decades with smaller town centres missing out on new shops, offices and housing because of the economic malaise, research this week will reveal.

A “flight to quality” has seen developers and investors target prime locations in the country’s biggest cities, with Aberdeen proving the main draw.

Property experts also point to some upturn in activity in Edinburgh and Glasgow, where the green light has just been given to a £65 million speculative office development at St Vincent Place.

However, secondary locations – including Central Belt towns such as Coatbridge, Falkirk and Paisley – have largely fallen off investors’ radar screens.

The latest Scottish Property Review, published by Edinburgh-based consultancy Ryden, highlights some green shoots but also cautions against an early return to historic activity levels.

The firm’s 72nd biannual report is one of the most exhaustive studies of its kind and outlines every major office, retail and industrial letting and investment deal over the past six months. It is seen as a trusted benchmark.

Mark Robertson, Ryden’s head of consulting and author of the review, said: “This is the most polarised I have ever seen the market. You have everything from ghost towns to gold rush towns.

“Across the commercial property market there is a flight to prime that began at the start of the recession and is continuing. There is a risk that secondary locations could be left well behind. The question of what the solution is going to be for some of the more tired towns is really difficult now.

“In the last upward wave of the market cycle they would have got a bit of housing or retail warehouse development, perhaps some small business park space. It’s hard to see in a lot of locations when that wave is going to start again.”

The report, which is due to be sent out to clients this week, notes that Scotland’s property investment market continues to be “patchy”, and focused on specific sub-sectors, including pre-let development fundings and office transactions in Aberdeen.

With the banks focused on de-leveraging, a number of new participants have entered the market. Robertson said: “Investor sentiment is improving but it is highly selective. These decisions are made on very specific criteria about the future market opportunities and location.

“It is difficult to see that spreading out to the regions and secondary locations.”

He added: “New funders are appearing, but behind the scenes there is still a major volume of refinancing required in the property sector. There is a lot of debt waiting to be refinanced.”

Ryden believes the completion of tramworks in Edinburgh will improve the city’s retail landscape and “return the streets to the shoppers”. In Glasgow the opening of the £70m Buchanan Quarter and £200m plans to extend Braehead will reinforce its status as the UK’s second busiest retail destination, after London.