In the historic Scottish fiefdoms of Ayrshire, Lanarkshire and Dumfries and Galloway in which I operate, the commercial property environment is rich and diverse and, in many ways, quite accurately reflective of the wider market in Scotland as a whole.
As in the rest of the country, there is quite a lot of investment money sloshing around trying to find a home but, while most professionals are very busy, things are taking longer to complete as the lingering effects of Covid drag on.
Stock shortage remains an issue and anything that comes up is moving handsomely, even units that in previous periods would have been a serious struggle to shift.
A recent analysis showed that £1.2 billion has been invested in Scottish commercial property in the first three quarters of 2021, up by a fifth on last year, which is hardly surprising given what we were living through then, but down by about £500 million on 2019.
Where there is investor hesitancy, again it is hardly surprising given the scaremongering and uncertainty that has been in the air, culminating last week’s (w/e 5 November, 2021) trepidation – unfounded, as it turned out – about a rise in interest rates.
The surprise outsider coming up on the rails in South-West Scotland has been the number of businesses which have blossomed in the past few quarters as lockdown enterprises have outgrown their domestic beginnings and have taken on commercial premises.
This has created quite a buzz around secondary-rated retail units which have low rent and rates – in some cases, no rates – and are often situated in areas which have been sorely affected by the pandemic.
With 100% relief on RVs of less than £15,000, allied to a slew of other temporary Covid-related reliefs, the pain is a lot of town centres has been eased by occupiers who only have to find rent and utilities for their premises.
Hot food takeaways have also been gobbling up a tasty share of the market, with new Greggs, Costa, Starbucks and piri-piri chicken outlets springing up all over the territory. Service businesses such as hair and nail salons are also in the ascendancy.
The obverse side of this coin is that the woes of the traditional High Street remain unabated, and large units are assailed by a combination of hefty business rates, changing consumer patterns and the continuing advance of out-of-town retail parks. M&S, for instance, a keystone player in Ayr’s town centre, has recently decamped to the outskirts.
Industrial property and retail warehousing have been the stand-out investment performers in Scotland this year, with the industrial sector alone attracting £259 million of investment in the last nine months, more than double 2019’s £109 million and 2020’s £112 million.
Locally, there has been a frenzy of demand for small workshops and units, with distribution and packaging a key factor as online shopping and home delivery continue to park their tanks on the High Street’s lawn.
Small units are difficult to build from scratch and many developers have turned to older estates, not only bringing them back to life but also driving rental expectations as well as growth in occupancy and value.
The office market is bouncing back, albeit from an almost prostrate base. There is plenty of stock in city centres and requirements are coming in from agents on a daily basis as the realisation dawns that people can’t sit in their homes for ever.
Small offices in outlying areas are also enjoying their moment in the spotlight and landlords are adjusting to new realities by creating business centre-type environments with a range of sizes and by not insisting on tying tenants into long leases.
The first quarter of next year will most likely see a settling down period as the ending of furlough brings the next tranche of casualties – a process which will almost certainly be offset as investor money sweeps up the insolvency-related prizes.
The market in 2022 may be different, but we can guarantee that it won’t be dull.
By Anthony Zdanowicz, Associate, Ayr