The commercial property market in West Central Scotland has picked up recently and, while it would be over-egging the pudding to say it is buoyant, it generally is as upbeat as it has been for a while.
Some areas remain sticky and the retail market, for instance, has not lacked bad news – especially in the regions where local high streets have suffered badly. It is a malaise which has spread nationally as shopping habits inexorably change.
However, the secondary retail market is becoming more reasonably balanced, with landlords reassessing where their expectations need to be if they want to let or sell their properties.
On top of that, rateable values and changes in local taxation have, despite apocalyptic headlines, actually helped in many cases. The obvious beneficiaries are smaller shops with RV of less than £15,000 which can end up paying no rates at all.
Across the regions, there has been healthy activity in buying, selling and letting of shop units. Particularly attractive are retail outlets with tenants which the landlord is wailing to sell. Buyers, restrained for so long, are emerging with ready cash to plough into property in the £400,000 to £750,000 range where they can expect a better return than on most other asset classes. Buyers reflect typically from retired couples wanting to diversify their portfolios or from professional people with idle money.
Above the £1 million mark, the investment money tends to be national, coming from property companies which have exhausted their search for bargains in over-priced London and Manchester – and, more recently, the North-East of England.
The perception that “cheap” opportunities await in Glasgow and Edinburgh has become rather out-dated and Aberdeen, which was lying with its throat cut for so long, has strengthened and regained some of its feelgood factor.
The industrial market, as in line with the rest of the UK, is very strong, although there is no single, easily identifiable reason why this should necessarily be the case. Rather than just the weight of money in the market from investors, it seems the distinct lack of new speculative development has meant occupation levels across the country are at an all time high.
The reason for this dearth of new building is two-fold: it has been hard to finance and the cost of producing high-quality industrial units is so high that in many instances it becomes unviable and developers shy away, regardless of how much they would love to build. As a result the secondary units on the market are getting another shot. Units where the worry might have been not being able to find another tenant are now being taken. The combination of rapidly reduced supply and increasing demand levels because there is little new product has created a market that is performing vigorously.
Distribution, as a sector, is doing very well as consumption inexorably migrates online. At a lower levels, the popularity of industrial units for businesses such as scaffolders and builders reflect an economy which is on a relatively even keel. Smaller units in good condition are flying off the shelves.
The strong industrial situation is not quite reflected in the office sector, which remains patchy. In Glasgow it continues to be evident that the new Grade A stock lets well. However, beneath the Grade A stock, the market is weaker with a surplus of decent Grade B vacant space.
Overall in the UK, there are clearly factors at play changing the face of the office landscape with new working patterns and more reliance upon online systems meaning in general overall a reduction in need for chunks of the existing office stock. This has meant an evolving scenario looking to change of use for many of the traditional office buildings. Rather than struggle to re-let them, owners are selling them as suitable for conversion to hotels, student accommodation or even, in some cases, private residential occupation.
It’s an intriguing market and optimism can justifiably prevail.
Jonathan McManus is a Director in the Glasgow Commercial Agency of DM Hall Chartered Surveyors.