Figures from Colliers International Suggests Office Space will be Needed, but Developers and Investors Remain Cautious
The uncertain political climate means firms are being starved of suitable office developments in Scotland’s economic centres, as investors exercise caution ahead of Brexit, commercial property firm Colliers International is warning.
Research presented at Colliers’ recent Scottish Economic Breakfast Briefing showed businesses have weathered recent political storms well, suggesting that further growth is possible next year and that prime office space will still be in high demand. Activity was only slightly affected by the Independence Referendum and the latest GDP figures suggest Scottish firms recovered better than their English peers from the shock of the Brexit vote.
Patrick Ford, a director in Colliers International’s growing Capital Markets team in Scotland, said the last 12 months had seen soaring office demand in Glasgow in particular, where major office deals in financial services and the public sector meant property activity for 2018 was set to be double that seen in recent years at more than 1 million square feet.
But he added: “Although there is every indication that demand for premium offices will continue into next year - there are several large companies specifically looking for space - it is another matter to persuade developers and investors to make a move at this time. It’s unfortunate, as this should be a time of real opportunity for the city, with many key sectors and employers looking to beef up their presence, to take advantage of the skilled workforce, good communications and other advantages Glasgow offers.”
In a major sign that the city’s economic strategy aimed at nurturing key sectors such as financial services is working, Glasgow has seen large offices sold or leased to HMRC, Barclays and Clydesdale Bank in recent months. JP Morgan is among those looking for new premises in the city.
With demand matched by strong investor interest, Colliers has strengthening its capital markets capability in Scotland, with the recent appointment of experienced adviser Elliot Cassels, following Ford’s arrival earlier in the year.
Ford said investor interest in Scotland remains strong, especially from overseas investors, who benefit from the current level of Sterling. However, like developers, investors are inclined to wait and see what happens with Brexit. The additional political risk of a second independence referendum has not disappeared from Scotland, it has been diluted as a result of the uncertainty surrounding Brexit, he added.
“It’s very encouraging to see such healthy demand from major employers and value creators in the city, but business needs space to grow. Rents are under upwards pressure and in theory that should help, but we need to see cranes on the skyline” he said.
Beyond Glasgow, there are further encouraging signs for Scotland’s business: Figures from Colliers’ Breakfast Briefing also showed that what really moves Scotland’s GVA is the price of oil, which has strengthened significantly this year compared to 2017 and 2016.