According to the world’s leading commercial property services advisor, the value of the Scottish market fell to the lowest recorded level since 2001 in the final quarter of 2012. In research conducted by CBRE it is shown that only £212 million worth of investment deals were completed between the 1st of October and the 31st of December, bringing the annual total to only £1.01 billion.
Unfortunately, this demonstrates a certain decrease in demand for the Scottish market in the past 12 months, with the total marking a 15 per cent drop on deals since the end of 2011. In fact, it is one of the lowest figures recorded since the start of the Millennium, second only to the £919 million total achieved in 2001.
As is the case with much of the UK, the retail sector was the biggest problem in Scotland, with transactions to the value of £190 million being made throughout the year. This meant that only 19 per cent of deals involved retail properties – well below the five year average of 37 per cent.
The industrial sector fared slightly better, with flat values of £146 million. However, returns registered at 3.3 per cent, well in line with the UK average and providing some levity in a relatively difficult market.
However it was the office sector which proved to be the salvation north of the border, with this corner of the market even managing to register growth.
Office deals represented 42 per cent of annual transactions, outstripping the five year average of 36 per cent and recording a total value of £426 million. While returns only managed to clock in at -0.6 per cent, this performance put Scotland second only to London in the office sector returns category.
While the Scottish commercial property market may not have managed to set any records in 2012, it is fair to say that it performed in line with or better than much of the UK outside of London. Thanks to the high-profile struggle of bricks and mortar shops against growing competition from internet retailers, it seems that the retail market will continue to drag down property deal statistics in many areas of the country.
Senior director of CBRE (Scotland), Aileen Knox, warns that the situation in Scotland is unlikely to change this year.
She says; “Looking ahead to 2013, it is expected that the market will not change dramatically and that conditions will be similar to that of 2012.”
Do you think the Government should be doing more to encourage commercial property transactions across the UK, such as offering business rate relief over a fixed term or incentives for more affordable rents? How could investors work together to get the market moving again and therefore see better returns on their properties?
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