Graham + Sibbald. A snapshot of key commercial markets across Scotland November 2022
As one of the leading firms of Chartered Surveyors and Property Consultants in Scotland, Graham + Sibbald offers a level of personal service, specialist skills, local knowledge and commitment that is second to none.
Our network of offices covers the country and we’re proud of the fact that we’re the first choice of many of the UK’s leading companies, including financial institutions, public sector bodies and residential and commercial property investors and developers.
Looking at some of the key commercial markets across Scotland at this current snapshot in time, as we barrel towards the end of the year, it’s clear to see that many of our commercial agents are reporting strong performances despite economic uncertainty.
Looking across Aberdeen and Grampian, we have have noticed a drop off in viewings for smaller premises of late but viewings requests for larger properties have remained steady. We would suggest there are a couple of reasons for this – the higher running costs for businesses at present coupled with the greater economic uncertainty which are proportionally affecting SME’s to a greater extent than some larger companies in our local energy sector driven market.
Some of the larger, or indeed those well placed to capitalise on the higher oil prices and UK’s push towards greater energy security, are seeing an upturn in business with additional demand for more or larger premises.
We normally expect a drop in enquiries as we enter the festive period and the additional economic uncertainty this year has certainly meant that investment activity, for instance, has dropped away earlier as investors plan for next year. However, our local market in Aberdeen is often to an extent counter cyclical and we are optimistic about its prospects in many parts of the property market.
Months after Covid restrictions in the UK were lifted, while there has not been a large-scale return of office workers to their desks, it’s great to see more people getting back in to offices. What remains unclear is whether the colder weather will begin to push any reluctant staff back in to offices to save on their own domestic bills. It will be interesting to see how the office market fares in early 2023.
Through in Perthshire, unsurprisingly, the industrial market has been the most buoyant, mirroring the national trend. The market has benefited from a Covid bounce and both tenant and purchaser demand has been strong with standout performers mainly being small units sub 3,000 sq ft where rents have moved from historically low levels of £4 to £5 per sq ft towards £7.50 per sq ft.
Traditionally, Perthshire’s owner-occupier market has always been strong, fuelled by a combination of a high concentration of SMEs operating in Perthshire, a constrained supply and ever-popular investment appeal of holding property in SIPPs, SSASs and other similar investment vehicles.
The office and retail sectors remain challenging and are likely to remain so for the foreseeable future. However, such challenges also offer opportunities to re-purpose buildings with limited occupier demand offering scope for alternative uses such as a blend of residential leisure and recreation.
The appeal of modern, energy-efficient buildings with parking and increased space efficiency is evident across the board. As such, demand for both medium-sized, self-contained suites, and smaller, serviced offices within business centres will continue as occupiers seek flexible accommodation and place increased importance on the quality of their working environment.
This will likely widen the value gap between modern and older stock with rental growth for newer, quality offices remaining positive. However, it’s not all bad news for older, city centre stock. Most of these buildings are attractive Georgian or Victorian townhouses, easily capable of residential conversion to their original use.
With downwards pressure on High Street retail values and rents a nationwide concern long before the onset of Covid, retail is the sector most focused on the impact of the upcoming 2023 Rates Revaluation. Particularly pertinent is how this could positively assist retailers in reducing their occupational costs. Out-with the prime High Street stretch there are some positive signs thanks to Perth’s strength in the independent retail sector.
This has been fuelled in part by owner-occupiers, and in some instances, the relocation of long-established businesses to preferable trading locations. This has provided some stability to these areas.
The general commercial property market in the Stirling and Falkirk areas has proved to be quite resilient throughout 2022. Industrial demand has remained strong, however, there continues to be a general lack of supply of units across most sizes ranges.
Despite the well documented challenges presented by Covid, the office market in Stirling has performed relatively well, especially in the first half of 2022. Two lettings at the start of the year saw a total of 13,500sq.ft of space let at Castle Business Park where Graham + Sibbald acted on behalf of the landlords for both deals.
Across the retail sector a number of lettings in Stirling and Falkirk have been agreed during the second half of 2022, however, these have been for smaller units, where lower rateable values allow for tenants to claim Small Business Relief.
Development land continues to perform well, with strong demand for sites suitable for affordable housing. Care providers are still active in the current market, with two new facilities recently opening in Stirling and Graham + Sibbald recently finalising the sale of a 3 acre site in Callander to Balhousie Care Group who plan to build a 50 bed facility.
Given the head winds currently affecting the economy, there has inevitably been a slow-down in the number of enquiries being received over the past few months and we expect this will continue for the rest of 2022. Time will tell how the commercial property market will perform in 2023. A sustained period of political stability, an end to the war in Ukraine and a calming of world fuel and food costs would certainly help to bring confidence back into the market.
Through in the West of Scotland, while market sentiment has shifted over the course of 2022, viewings and interest remain strong, especially in the industrial sector. There is no doubt that increased uncertainty has shifted the dial from a “Landlords market”, to a more equal or even “Tenants market”, however, despite this we have seen no fall off in demand for accommodation. This equalisation has meant that Landlords do need be more negotiable in order to secure Tenants in 2022 in comparison to this time last year, but in our opinion this will ensure that demand remains high as occupiers look to secure more favourable terms.
2022 has seen major changes across the market due to macroeconomic events. These issues have of course had an impact on the market, however the robustness of Real Estate has been impressive, despite substantial and varied headwinds. As a result, we expect that the property market will continue to flex to deal with these issues towards the end of 2022 but hope that the obvious difficulties facing real estate in 2023 will not be added to. Therefore, allowing Owners, Landlords and occupiers alike a chance to deal with the issues at hand and move forward in a positive manner.
In recent months, we have assisted various clients in securing improved accommodation to meet the requirements of the modern workplace. While the motivations for each business differs, the benefits afforded to occupiers is fairly standard – whether it helps businesses to meet their ESG requirements and reduce utility costs, motivate staff and colleagues back to the office on a more regular basis or reduce overheads and running costs by acquiring more efficiently space planned accommodation; the benefits can be secured by all.
Our national Hotel + Leisure specialists commented that the “trials & tribulations”, over the past 2 years, within the Hospitality sector in Scotland have been well documented but the effect of the operational difficulties have not yet filtered into the property and transactional market.
Deals have and are being done, whether provincial/rural hotels or city leasehold properties. Buyers are from a cross-section with larger deals largely led by the overseas investors who still view the UK, and therefore Scotland, as a “safe-haven” to invest in; as well locally based buyers.
Although, as always, towards the end of any year, enquiries naturally do slow down; but this year exacerbated by the macro/external factors of interest rate increases, inflation, energy costs and more. The “crystal-ball” forecasting is largely “cloudy” whilst the world waits to see how these external factors will settle down, hopefully, in early 2023. But, once settled, wherever those levels may be, our team are confident that the demand for property and business in the Hotel + Leisure sector will remain at good and acceptable levels though perhaps with limited hope of any real growth in values.
In May of this year our Hotel + Leisure team announced the sale of the Polochar Inn, South Uist. The hotel was sold by Duncan Aitken, a local businessman who had owned the Hotel since 2018, and was acquired by American owners who want to build a small group of independently owned hotels throughout the Islands of Scotland.
Shortly after, in early June, our Hotel + Leisure team sold the McMillan Hotel portfolio which saw Bespoke Hotels purchase all three properties which included North West Castle in Stranraer, Cally Palace Hotel & Golf Course in Gatehouse of Fleet and Fernhill Hotel in Portpatrick.
Whether you are looking for advice or to discuss a commercial property acquisition or disposal, please visit our website at www.g-s.co.uk to find your local office team or browse our currently available properties.
You can also view all of Graham + Sibbald commercial property listings on NovaLoca here.