It’s a well-known fact: uncertainty is bad for business. And right now, Scotland’s property market is feeling the jitters as the general election looms.
New figures from property advisory firm Lismore Real Estate Advisors reveal that investment deals in Scotland’s commercial property market fell by 15% in the second quarter of this year. This means that deals worth just £272 million were struck, a far cry from the £320 million seen during the same period last year.
What’s Causing This Slowdown?
Experts say the uncertainty surrounding the election, combined with the expected interest rate cuts, is making investors hesitant.
Lismore director Chris Macfarlane explained, “A smaller number of larger ticket sales, combined with continued uncertainty in the market over the timing of future interest rate cuts and the impending general election, has affected transaction volumes.”
Signs of Hope?
Despite the slowdown, there’s some good news. Buyer-seller disagreements are starting to ease, with more buyers showing interest in the market.
Where the Money’s Going
The focus is on living and logistics sectors, with retail warehousing gaining particular interest. It seems everyone’s interested in where those Amazon deliveries are coming from!
Challenges Remain
Macfarlane highlighted a key concern: “Development continues to be hindered by stubbornly high build costs and uncertain exit pricing.”
A Call for Strong Leadership
Macfarlane believes that the new government needs to act decisively to create a business-friendly environment for sustained growth. “Change brings opportunity – let’s hope for competent leadership to drive our future forward.”
Big Deals Despite the Uncertainty
Even with the overall slowdown, some major deals went through. The biggest was the £45.8 million acquisition of 1 West Regent Street in Glasgow by Corum Asset Management.
Other notable deals included:
- Remake Asset Management’s £36.6 million purchase of HQ buildings in Dundee and Glasgow, leased to BT and STV.
- Ropemaker Properties’ £14.73 million sale of four prime industrial units in Cambuslang to Ediston clients.
- The off-market sale of Malmaison at St Andrew Square in Edinburgh by Associated British Foods to Patrizia clients for £23.5 million.
The Outlook for Different Sectors
- Logistics and Multi-let Industrial Properties: Demand is strong, with prime yields around 6%.
- Offices: Yields are improving, signaling a potential upturn.
- Retail Parks: Offering “compelling value” with yields between 6.5% and 7%.
What This Means for Developers and Investors
The message is clear: while there are challenges, there are also opportunities. Be prepared for a bit of a wait-and-see approach, especially until the election dust settles and we get a clearer picture of the economic situation.