The Future of Glasgow's Real Estate

The Future of Glasgow's Real Estate
 
Infrastructure drives the market

2 February 2017, by Savills Research

Improvements to infrastructure around Glasgow will continue to prompt development activity across real estate sectors

 

Greater Glasgow is defined by its connectivity. With over 1.7 million people living within the region, road and public transport links are of great importance allowing residents to access employment, leisure and retail facilities. Many of Glasgow’s most popular residential suburbs benefit from direct, fast links to the city centre and to the large shopping centres.

Some of the £1.3 billion of City Region Deal funding has been invested in or is targeted towards strengthening this network. Improving connectivity will increase the attractiveness of existing areas and facilitate new development as a result.

Industrial

There has been considerable trading activity for well located and well let multi unit industrial estates across Glasgow and its surrounding areas, and this is set to continue throughout 2017. This increased demand for industrial space has largely come from the growth of online retail, with a need to be located close to a wide consumer catchment. Around 30% of the UK’s total industrial floorspace taken in the UK during 2016 was from internet retailer Amazon. This included taking 330,000 sq ft letting of J4M8 in Bathgate, near Edinburgh.

Traditional store-focused retailers have also been important players. Lidl have taken space at Eurocentral to create a regional distribution centre to support the growth of their in town retail.

However, it is mostly smaller logistics and distribution based schemes which will be the key drivers of demand going forward. One such scheme is Evolution Court, Hillington Park, which is made up of four separate units and will provide circa 90,000 sq ft of industrial space. The market continues to prove most active on sub 10,000 sq ft units, with well located modern product benefiting due to the lack of development.

The lack of existing modern industrial space and extremely restricted development pipeline has led to pent up demand for prime locations. This imbalance should have a positive impact on property investment and rental values for industrial properties going forward.

For an industry where infrastructure is a major driver, key improvements to complete the M8 and improve the Raith interchange will benefit the industrial market directly through improved connectivity with the Scottish and UK industrial markets.

 

 
Glasgow industrial park

▲ The industrial market is supported by infrastructure

Business parks

Take-up of business park space has improved and is anticipated to continue as the ripple effect of rising rents and lack of good quality city centre stock continues. Meanwhile a healthy supply of out of town stock perpetuates.

Only one new business park is planned, the circa 1.2 million sq ft Magenta scheme in Clyde Gateway. It benefits from an existing rail network, improving road infrastructure and is surrounded by new residential development and mixed-use leisure facilities.

Historically out of town business parks with little public transport infrastructure have struggled to attract tenants, despite containing high quality stock. Nova Business Park in Robroyston is one such example, however, a new proposed park and ride facility could be a game changer.

Retail

Glasgow’s out of town retail provision has improved considerably in recent years, with schemes drawing on leisure provision in order to create a “destination”, which offers much more than shopping alone. Infrastructure projects such as the extension of the M77 and the proposed Yoker to Renfrew road bridge have and will create much larger catchments.

The 1.5 million sq ft Silverburn Shopping Centre now contains a 4D cinema alongside a plethora of restaurants, likewise Braehead shopping centre’s proximity to the Intu Centre with its cinema, restaurants and crazy golf alongside an indoor ski slope, are both prime examples of this evolution in shopping. Finally, Glasgow Fort recently extended its offering with an M&S and now incorporates a Vue cinema and restaurant.

FIGURE 4

Infrastructure improvements will help to pave the way for the city’s wider development

 
Figure 4

Source: Savills Research

Residential

This connectivity, short commuting distances and established communities are compounded in some areas by the location of well-regarded schools.

These established suburbs attract significant premiums. Bearsden and Milngavie in East Dunbartonshire command 43% and 10% respectively, above an already comparatively high average of £215,980.

Newton Mearns in East Renfrewshire, Scotland’s most expensive local authority, commands an average transaction value 24% higher than average.

This places many of these areas beyond the means of most purchasers. Therefore, demand exists for more attainably priced housing in well-connected locations with access to amenities.

The development of out of town retail and leisure developments such as Silverburn and Braehead with their excellent transport links has benefitted housing in the wider area through the increased provision of lifestyle amenities in areas such as Darnley, Renfrew and Cowglen.

At Cowglen, near Silverburn, 500 units are currently underway by Persimmon Homes adjacent to the centre. Braehead has seen 10 years of development on the brownfield sites at Ferry Village, with more planned.

This area has become attractive, with an average transaction value of £145,789, £10,000 higher than the local authority average, which to a degree represents a new build premium.

Both the Braehead Shopping Centre and the local residential markets will benefit from the construction of the £90 million Yoker to Renfrew road bridge after it was recently given planning permission

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