In Scotland’s commercial property market, recent data reveals a complex picture of subdued demand, varying trends across sectors, and a cautiously optimistic outlook for the future.

Demand

According to the latest report from the Royal Institution of Chartered Surveyors (RICS), the last quarter of 2023 witnessed a stagnant overall demand for commercial property in Scotland. However, this headline masks some interesting sub-sector trends:

• Office and Industrial Spaces: Contrary to the overall trend, these areas saw a surge in interest. Office spaces had a net increase in demand by 8%, while industrial spaces jumped even higher at 18%.
• Retail Spaces: In a stark contrast, retail spaces faced a decline, with a 21% drop in demand.

Space Availability A Growing Concern

As the demand narrative unfolds, there’s also a shift in space availability:

• General Trend: There’s an increase in available commercial properties, with a 12% rise reported by Scottish surveyors.
• Office and Retail Spaces: These sectors experienced significant increases in availability, with office spaces up by 14% and retail spaces soaring by 33%.
• Industrial Spaces: Demonstrating a different trend, availability of industrial spaces decreased, indicated by a 12% drop.

Investor Interest

The investor situation in the last quarter shows mixed signals:

• Overall Drop: There was a general fall in investor interest, with a net balance of -20%.
• Industrial Space Enquiries: Bucking the trend, this sector saw a 5% rise in investor enquiries.
• Office and Retail Space Enquiries: Both sectors witnessed declines, with office spaces dropping by 26% and retail by 38%.

Future Expectations

Looking ahead, the expectations for rental and capital values paint a brighter picture:

• Short-Term Optimism: Rental expectations for the next three months continue to be positive, marking a third consecutive month of optimism.
• Capital Value Outlook: There’s a hopeful sign for capital values over the next 12 months. For the first time since the second quarter of 2022, a net balance of 7% of respondents anticipate a rise in capital values.
• Sector-Specific Expectations: Surveyors foresee increases in both office and industrial spaces, with net balances of 12% and 33% respectively.

Industry Voices

Key figures in the Scottish commercial property sector shared their insights:

• Graham Mitchell, Managing Director at George Davie in Glasgow: Mitchell observes recovery signs, with increases in enquiries and demand across various sectors.
• Paul Kettrick, Head of Invest Falkirk at Falkirk Council: Kettrick notes a strong demand in the industrial sector, attributed to infrastructure investment programmes.
• John White, Director of Hunting Real Estate in Glasgow: White suggests that offices and retail might be nearing their market cycle’s low point, while industrial spaces continue to thrive due to limited development land availability.