Scottish property sector to '˜ride out' Brexit uncertainty

The underlying strength of demand for commercial property in Scotland will see it bounce back from any Brexit-related dip next year, an influential report predicts.

Atlantic Quay is one of Glasgow's major office developments. Picture: Contributed

Although many in the industry are expecting Brexit negotiations will lead to a quieter first quarter in 2019 as sellers postpone marketing initiatives until after the dust has settled, the latest Scottish Property Review published by consultancy Ryden argues that the underlying market in Scotland “is resilient and will recover”.

While the “firepower and enthusiasm” of overseas investors may be dampened if the outcome of talks is seen as negative or if currency rates move against them, the report also points out that could benefit UK institutions.

The prediction comes as the report said the current strong momentum being seen in the Scottish market is set to continue for the remainder of the year as investors look to secure better returns than on offer elsewhere in the UK.

The report – published twice a year and now in its 83rd edition – documents strong demand across the sector and confirms other recent figures which show the appetite for quality office space in the Central Belt in particular is booming.

Both Glasgow and Edinburgh office markets are constrained by very tight supply and Ryden reports major occupiers are signing deals to pre-let the best new space under construction, leaving limited choice for occupiers who want to upgrade.

“In Glasgow the next cycle of speculative development and high specification refurbishment is starting, but Edinburgh’s long-term future is not so clear due to the shortage of suitable development sites in the city centre,” it said.

The industrial market across central Scotland has had an “exceptional few years of demand” and in 2018 this translated into significantly more potential new industrial developments moving through the planning process.

Projects are underway or planned at sites including Eurocentral, Hillington and Sighthill, but despite the number of projects coming forward Ryden said the supply of industrial units will still fall well short of the demand for new space. It added that prime industrial rental growth is now extending outside the main cities to surrounding areas such as East Kilbride and Cumbernauld.

Aberdeen and the north east is still experiencing different market conditions to the rest of the country, although Ryden said confidence is returning.

The number of office lettings in the city is described as “slow but stable”.

Ryden’s Mark Robertson, editor of the Scottish Property Review, said: “It looks likely 2018 will exceed 2017 in terms of investment volume in Scotland. Demand for good quality office and industrial stock continues apace and it is excellent to see developers and investors moving forward with new schemes to meet that.”