Commercial

The recovery starts to make itself felt

 The prime office markets in both Edinburgh and Glasgow are facing a looming lack of modern supply as the recovering economy leads to further business expansion and corporate occupiers seek to improve the quality, location and specification of their office accommodation.

The three prime site developments currently reaching fruition in Glasgow will not be sufficient to satisfy demand.  There will be a time lag between existing leases coming to an end in 2016 / 2017 and new buildings coming out of the ground.  Landlords are addressing the issue with new refurbishments and there is an opportunity for those who wish to invest in this market, as Aviva has done with their properties at 123 St Vincent Street and The Beacon building in Glasgow.  Properties which have the potential to be marketed as Grade A space have capacity to generate significant rental growth for those landlords prepared to invest in them.

In Edinburgh, Standard Life Investments and joint venture partners, Peveril Securities have begun work on the speculative development of 3-8 St Andrew Square in Edinburgh.  In the heart of Edinburgh’s New Town, this prime development is timed for completion in late 2016, when there are a significant raft of lease events in the financial, corporate and professional sectors within the Capital.  The £75 million project will create a 190,000 sq ft mixed use scheme, which will included 105,000 sq ft of Grade A offices and 85,0000 sq ft of retail as well as high quality residential apartments.  This is the only true Grade A development on a garden square in the UK and will provide the most modern specification and finest finishes seen in the capital.

There is now a market for speculative commercial development, with an upturn in demand.  We are currently dealing with twelve serious enquiries office enquiries for purchases and lettings at Pacific Quay, Glasgow’s leading waterfront development, with an important closing date being set within the leisure sector, and several serious enquiries within the retail..

Looking at the industrial markets across Edinburgh and Glasgow, supply of good quality space is in dwindling, especially for large units.  The launch of Blackburn Road in Bathgate and Eurocentral are well timed.  However there continues to be a mismatch between price aspirations of potential occupiers and the asking prices which reflect increased costs involved in sustainable design and construction, and reduced running costs.

In the city centres prime retail pitches in Glasgow’s Buchanan Street and Edinburgh’s Princes Street and George Street are performing well, whilst sites in more secondary locations remain challenging.  The convenience food sector is a particularly strong performer with continued expansion of Sainsbury’s Local, Tesco Express and M-Local chains in key prime high streets, throughout Scotland. Another hero of the retail sector throughout the downturn has been restaurants, with new leases being signed in Glasgow for Giraffe, Gourmet Burger Kitchen and Prezzo to name just a few. This trend is likely to continue.

Despite some buyers staying away from the Scottish market due to the referendum vote, the Scottish Investment team have been involved in some of the largest transactions of 2014 in Scotland so far.  Their view is that good quality real estate will always attract buyers, as long as it is properly priced.  Highlights of the year so far include the sale of the 550,000 sq ft Rolls Royce plant at Glasgow airport for £55,000,000 and the sale of 130 student studios at the Gallery Apartments in Glasgow for £17,200,000.  The team are forecasting a busy summer period as they are also currently involved in the sale of a 200,000 sq ft logistics unit in East Kilbride, let to Sainsbury at an asking price of £14,750,000 and the sale of East Kilbride Shopping Centre, which at 1,400,000 sq ft is one of the largest covered shopping schemes in the UK.

In addition to the strength of activity in the west coast, the business has also continued to be active in the key markets of Aberdeen and Edinburgh, transacting in excess of £50m of stock in the first half of 2014.

 
 

Key contacts

Keith Dobson MRICS

Keith Dobson MRICS

Director
Office & Industrial

Savills Edinburgh

+44 (0) 131 247 3801

+44 (0) 131 247 3801

 

Bruce Patrick

Bruce Patrick

Director
UK Investment

Savills Glasgow

+44 (0) 141 222 5873

+44 (0) 141 222 5873

 

Nick Penny MRICS

Nick Penny MRICS

Director
UK Investment

Savills Edinburgh

+44 (0) 131 247 3803

+44 (0) 131 247 3803

 

David Cobban

David Cobban

Director
Office & Industrial

Savills Glasgow

+44 (0) 141 222 4101

+44 (0) 141 222 4101

 

Ross Allardice

Ross Allardice

Director
Retail

Savills Glasgow

+44 (0) 141 222 5889

+44 (0) 141 222 5889

 

Mark Fleming

Mark Fleming

Director
Investment

Savills Glasgow

+44 (0) 141 222 5859

+44 (0) 141 222 5859