Agents see signs of pick-up following subdued quarter
The Titan building at Eurocentral was a key sale
A new forecast has emerged of a rebound in commercial property following subdued investment volumes in the first quarter.
Colliers’ Scotland said investment volumes fell to £149 million, well down from £335m in the final three months of last year, and more than 70% below the five-year quarterly average of £536m.
However, investment activity at the start of this year has been much stronger than during the first lockdown in quarter two of 2020, when only £50m was transacted.
The review is less optimistic than research from Knight Frank showing investment in office space in Edinburgh was higher than during the first quarter of last year and that the capital had remained robust. Both firms report expectations of a pick-up in activity.
Patrick Ford, director, National Capital Markets, Colliers in Glasgow: “Unsurprisingly, given renewed lockdown restrictions, it has been a slow start to the year in terms of commercial property investment in Scotland.
“However, we expect to see a robust rebound in investment volumes throughout this year, thanks to a significant build-up of capital waiting to target the market.
“Looking at occupier activity, the industrial sector remains relatively buoyant and there are signs of renewed interested across the board in Scotland with some normality set to return as we slowly emerge from lockdowns.
“In the office sector, for example, we’re expecting some recovery in the second half of this year.”
Oliver Kolodseike, Deputy UK Chief Economist, Research and Forecasting, at Colliers, said: “Offices, retail and industrial all experienced muted levels of investment activity at the start of this year, well below their respective five-year averages. This was largely due to the impact of lockdown, including people being asked to continue working from home wherever possible.”
In the industrial sector, Colliers expects the final year turnover to be between 5% and 10% above the 2019 level.
Just over £30m was invested in the industrial sector, down from £94m at the end of 2020 and half the five-year quarterly average of £61m. The largest industrial deal of the first quarter was the sale of a 124,000 sq ft distribution warehouse at Eurocentral in Motherwell to Lothian Pension Fund for £14.3m.
In retail, rents will continue to fall as more companies enter administration and shops become obsolete, and the move towards shorter lease lengths and rent based on turnover is unlikely to change.
Patrick Ford: slow start
Deal activity in retail came to a virtual standstill in the first quarter, totalling less than £10m. This was down from £51m at the end of 2020 and much lower than the five-year quarterly average of £128m. One notable deal involved the sale of 75 George Street in Edinburgh sold to an unnamed investor for £5.
In report from CBRE published on Friday Stewart Taylor, head of the Scottish office agency business, said: “The modest levels of office space take-up during the first quarter of the year won’t surprise anyone.
“However, what we are seeing, despite the lockdown, is that occupiers, particularly the corporates, now have a sense of their direction of travel.
“They want to provide great workspace for their returning employees and while it varies sector to sector, most employers want their staff in for part of the week.
“This may mean less space in some cases but it also means higher quality, ESG-enabled accommodation. As restrictions are lifted there are positive signs of a busy second quarter with some healthy requirements to fulfil in both Glasgow and Edinburgh.”