Supply and demand balance
Demand for office space has continued to grow in Scotland, although the situation remains patchy.
In Edinburgh, take up in the first half of this year seems to have exceeded that in the same period last year, with Glasgow having done extremely well in the first quarter although not so well in the second. Aberdeen take up appears to be less than last year, but the figures might not reflect the reality of demand in the oil capital where there is clearly significant activity.
As to retail, it will be no surprise to many that the major shopping centres have, on the whole, fared better than the high street locations in attracting or retaining occupiers. Secondary locations, such as smaller town high streets, struggle to maintain retail use and many owners are having to consider change of use to other businesses or to flats or houses.
Over all, industrial stock delivered modest rental growth in Scotland in the first quarter of 2014 and we mustn't forget the student accommodation sector which is in rude health.
Rental levels and incentives
Across the board there is rental growth, although most rental values have not yet recovered to their pre-recession levels. The rising demand coupled with a dearth of available good quality space (due to the lack of speculative development) has meant that, in addition to the stabalising (and growth) of rents, landlords are not having to offer quite such hefty incentives to persuade prospective occupiers to sign up.
Re-emergence of speculative development
Speculative development, which almost disappeared in the depths of the economic downturn, is beginning to happen again in Scotland. As with demand for space generally, such speculative activity is patchy but undeniably present.
Among the Edinburgh developments that are either underway or funded ready for start are the completion of the Quartermile development (where Morton Fraser are based), preparatory demolition for a new office, retail and leisure development on the south west corner of St Andrew Square, the proposed transformation of the St James Centre and the Haymarket development. For Glasgow there are a number of new grade A offices under construction in the city centre and we also have the Clyde Gateway in Rutherglen and the Buchanan Galleries extension.
Continuing presence of the referendum uncertainty
There is much good news, and the uncertainty over the referendum decision has not resulted in the degree of stagnation of the market that some had feared. That said some property players are holding off on buying, selling or committing to take space pending the result of the vote.
We are also aware that some parties who have entered into contracts recently (where the deal is not due to complete until after the referendum) have insisted that the contract includes a "Yes vote get out" clause. Such a clause provides that if there is a Yes vote then the deal is off or can be renegotiated - but if a majority vote No, then the deal goes ahead as planned.
Some commentators think that regardless of the outcome of the vote, the removal of the uncertainty as to whether or not Scotland will remain part of the UK will result in a rise in investment in Scotland. Sadly, no matter how good anyone's crystal ball might be, no one can say at this stage what impact a yes or a no vote will have on commercial property in Scotland or how long any continuing uncertainty as to what will happen in Scotland (even if there is a No vote) will have an impact on investment decisions.
Interesting times for sure.