The Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor paints a picture of stability for Scotland. The latest data reveals that demand from occupiers (i.e., those looking to rent or use commercial properties) hasn’t significantly shifted during the third quarter. This trend follows a similar trajectory from the previous quarter, maintaining the equilibrium of demand.

Segment Breakdown

Industrial and Office Space

These sectors have been witnessing an upward trajectory in terms of demand. According to the RICS survey:

• Industrial space: A positive net balance of 16% of respondents indicated an increase in demand.
• Office space: There’s a promising trend here too, with 9% of surveyors seeing a rise in interest.

Retail Space

On the flip side, the retail space segment seems to be in a pinch, with the figures suggesting more challenges:

• A net balance of -30% indicated decreased demand for retail spaces, although this is an improvement from -46% recorded a year ago.

Investor Demand: A Concerning Trend

Investor enquiries have taken a hit, with a net balance of -34% of surveyors witnessing a decline across all sectors:

• Office space: A drop in investor demand was noted by 38% of respondents.
• Industrial space: The decline was slightly more moderated at 23%.
• Retail property: Here, the drop was the most pronounced, with a 41% decrease in investor demand.

Projected Capital Values & Rental Trends

Capital Values

With a net balance of -23% of surveyors expecting a fall in net capital values across all sectors for the upcoming quarter, the outlook remains cautious. This sentiment has persisted for five consecutive quarters, underscoring a prolonged period of subdued optimism in capital appreciation.

Rental Expectations

Rents, on the other hand, offer a silver lining:

• Office and industrial rents: These are anticipated to rise, with 12% and 30% of respondents, respectively, expecting increases.
• Retail rents: This sector might face challenges, with a sharp 27% decrease anticipated, a significant drop from the 4% dip seen in the previous quarter.

Expert Views on the Ground

Douglas Wilson, director of Kintyre in Glasgow, anticipates challenges ahead, particularly with the looming threat of an economic recession. However, he believes the end of the current interest rate cycle could buoy confidence for both investors and occupiers.

In a more localized perspective, Euan Cameron from the Tayside Valuation Joint Board observes minimal demand for offices in the Angus, north-east Scotland region. However, he feels the retail sector might have reached its nadir, with rents stabilizing. He also highlighted the strong market for smaller industrial properties.