SCOTTISH PROPERTY REVIEW 2020 - Ryden
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SCOTTISH PROPERTY REVIEW 2020
3 SUMMARY AND OUTLOOK 4 ECONOMY 5 PLANNING 7 RESIDENTIAL DEVELOPMENT 9 OFFICES 17 INDUSTRIAL 24 RETAIL AND LEISURE 26 INVESTMENT CONTENTS RYDEN SCOTTISH PROPERTY REVIEW 2020 | 2
ECONOMIC GROWTH IN SCOTLAND FLUCTUATED
DURING 2019. Surveys conducted around the UK
General Election suggest that the Scottish economy
may have flat-lined for a period again towards the
end of the year.
Forecasts envisage the economic Those markets with the correct
growth rate doubling this year and fundamentals include the nascent
next, although still below the long Build to Rent (BTR) residential
run average. The early signs in sector, the prime Glasgow and
2020 are that a period of greater Edinburgh office and industrial
political stability – notwithstanding markets, and Aberdeen which is
the completion of Brexit and now clearly in the market recovery
Scotland’s ongoing constitutional phase. The retail sector remains
debate – is encouraging a more challenged, although there are
positive property market sentiment, selected, defensive retail sub-
particularly where the market markets and situations where
fundamentals are strong. pricing may now bottom-out.
SUMMARY
AND OUTLOOK RYDEN SCOTTISH PROPERTY REVIEW 2020 | 3
ECONOMY
GROWTH EMPLOYMENT OUTLOOK
Economic growth in Scotland recovered to Scotland’s unemployment for the three months Fraser of Allander Institute’s central forecast
0.3% in the third quarter of 2019. Output grew to November 2019 fell by 7,000 to stand at published in December 2019 anticipates
by 0.2% in the services sector and by 0.9% 105,000, equivalent to an unemployment rate economic growth of 1.3% for Scotland in
in the production sector but remained flat in of 3.8%. This is down by 0.3% on the previous 2020, followed by marginally stronger but
the construction sector. GDP grew by 0.7% three months and is now the same as the UK still modest growth of 1.4% in 2021 and 2022.
over 12 months, below UK economic growth rate. The overall employment rate of 74.3% The comparison of independent forecasts for
of 1.0% over the same period. was however below the UK figure of 76.3%. the UK economy published by HM Treasury
in January 2020 anticipates lower economic
The RBS Purchasing Managers’ Index for Employment gains were secured in the public, growth of 1.1% for the UK economy in 2020.
December 2019 showed a marginal fall in distribution and financial services sectors.
Scottish business activity to 50. This indicates Social Security Scotland is to create 100 jobs
no change in Scottish private sector activity at its Glasgow base in its first major round of
at the end of the year. recruitment. Lidl’s new £70 million Scottish
distribution centre is expected to create 250
jobs. In Edinburgh, Lloyds Banking Group is LIDL’S NEW £70 MILLION
GDP GROWTH COMPARED to create 500 high-skilled jobs at a new digital SCOTTISH DISTRIBUTION
TO LAST QUARTER (%) technology hub and digital payments company
Modulr Finance plans 53 highly skilled jobs.
CENTRE IS EXPECTED
0.5
TO CREATE 250 JOBS.
0.4
In the retail sector, department store chain
0.3
Watt Brothers’ administration led to more
0.2 than 200 redundancies. Manufacturing jobs
%
0.1 were lost at Dover Fuelling Solutions in
0.0 Dundee (120 jobs) and food manufacturer
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Devro in Bellshill (90 jobs). Notably, RBS
-0.1
cited digitisation of banking as a cause of
-0.2
150 job losses at its Greenock call centre.
Source: Scottish Government
ECONOMIC GROWTH FORECASTS 2020 2021
FRASER OF ALLANDER INSTITUTE (SCOTLAND) 1.3% 1.4%
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 4
PLANNING
The Planning (Scotland) This should hopefully trigger a number of
35.1 WEEKS
Local Development Plans (LDPs) reviews
Major housing applications
Act 2019 (Commencement which are currently on hold pending the new
decided on average –
transitional procedures. Many LDPs are
No. 1) Regulations ageing prematurely and any further delays the quickest on record*
would inevitably encourage speculation and
2019 came into force justification for major land releases around
in November 2019. larger towns and cities that has mainly been
resisted to date.
9
The regulations change
32.5
The new legislation also redefines the Purpose
how National Planning of Planning – which will be news to some – as
Framework (NPF4) is to “to manage the development and use of land
in the long term public interest”. Anything
be prepared and a Draft is which contributes to sustainable development
or achieves the national outcomes is to be WEEKS
now expected late in 2020. considered as being in the long term public WEEKS
interest. Planning authorities have a duty to Average decision time
align their functions and development planning for Local Development planning Major Development planning
with that core purpose. decisions. 2018/19 matched decisions were quicker
the quickest average decision on average
Definitions of sustainable remain focused
time since 2012/13
on carbon neutrality and transportation.
Thus global and national factors will be
relevant in shaping major new development
proposals and perhaps how they are received
by planning authorities. It is hoped that
325
renewed investment market confidence
is matched with confidence in a system
that responds more positively to external
influences and change.
DECISIONS
Total number of Major
Development decisions
*Figures exclude major applications subject to
processing agreements (just over a third) where
timescales for decisions are agreed in advance.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 5
The Commencement No. 2 and 3 Regulations also
came into force in December 2019 and are subject
to various procedural enactment dates.
These include a variety of detailed technical Pre-determination hearings for planning Audit Scotland’s Performance report
requirements such as: applications are usually held by the Planning 2019 states that planning authorities need
Committee of a local authority. Concerns were to ensure they have the staff, skills and leaders
• Changes to notification procedures raised that the requirement to then have a to deliver change. An increasing proportion
for major developments decision made by full Council meant that some of the workforce is nearing retirement and
decision-makers had not heard the evidence insufficient preparation for succession risks
• Specific reference to noise sensitivities actually given at the hearing. This requirement losing planning skills and knowledge at a
relating to cultural/live music venues has been removed. time when recruitment is also becoming
increasingly difficult.
• Higher fines for failing to comply with The Scottish Government has launched its
controls (and taking into account any ‘Transforming Planning’ website structured There are lessons to learn from some of
financial benefit gained) around the upcoming work on National the more pro-active authorities that have
Planning Framework 4 (NPF4), Planning established joint service streams – particularly
• Scottish Ministers to lay a statement before Reform and Digital Planning. planning and (sustainable) economic
the Scottish Parliament justifying the call-in development, with an attitude focussed on
of an application The website includes information on delivery rather than simply a mindset of
how the Scottish Government will engage control. Pitching in the right way to the right
• Changes to the powers to make regulations with stakeholders in the preparation of NPF4, people early in the process continues to be
about planning fees, including the ability and has opened a ‘Call for Ideas’ which runs the best focus for delivering major projects.
to introduce more discretionary charging until 31 March 2020.
– even discounts – and a surcharge for
retrospective applications There is still much focus on efficiency and
process – which is supported by the Scottish
• All decision notices on an application Government’s planning performance data for
must include a statement as to whether 2018/19 – and rather less focus on effective THE REQUIREMENT TO THEN
the authority consider the development is delivery and quality. Morale in most planning
HAVE A DECISION MADE BY FULL
in accordance with the development plan, authorities remains low – and budgets still
and their reasons for taking that view. lower – despite rises in application fees and COUNCIL MEANT THAT SOME
charging for pre-application advice. DECISION-MAKERS HAD NOT
HEARD THE EVIDENCE ACTUALLY
GIVEN AT THE HEARING.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 6
RESIDENTIAL
DEVELOPMENT
DEVELOPMENT There are still though relatively few smaller asset class, in a similar way to Purpose Built As residual land values for BTR continue to
The number of new homes completed in developers operating in the market for Student Accommodation. The BTR market is rise and compete with traditional private for
Scotland has reached its highest level since sub 50-unit developments. being driven by a cocktail of demand – some sale developments, it is anticipated that the
2008. The 21,292 new build homes across estimates suggest 1.7 million UK households sector will experience rapid growth in the
all sectors in 2018/19 was an increase of 18% Housing land values being achieved across living in the tenure within 10 years – allied to coming years.
on the previous year. The split between the Scotland vary dramatically between the main institutional investors seeking long term returns
sectors was 74% private housing and 26% city regions. and also local authorities recognising BTR’s New entrants to the Scottish BTR market
social housing. potential contribution in helping to solve the include Sigma Capital Group who recently
Highest values exist in and around Edinburgh housing crisis. established a joint venture with Springfield
While this confirms that housing output in with greenfield rates per acre ranging from Homes with the intention of providing
Scotland accelerated, there is uncertainty c. £1.0-2.0 million. In Glasgow, this range Current notable schemes are at Pitt Street 1,800 new build homes for rent following
over both the Help to Buy scheme which has is 50% lower at c. £0.5-1.0 million per acre. in Glasgow by Moda Living (433 units), and a £30 million investment from the Scottish
supported private sector output and also a Values have recovered well in recent months in Edinburgh with Skyliner in Leith by S1 Government’s Building Scotland Fund. Sigma’s
lack of clarity on grant funding levels available in Aberdeen and between £0.6-1.0 million Developments (338 units) and by Moda model is focused on delivering family homes
to Registered Social Landlords post-2021. is being offered. These levels apply to larger Living at Springside (573 units). rather than large scale apartment blocks
sites for in excess of 50 units. and has been very successful in the North
LAND MARKET of England.
For larger sites, competition among the BUILD TO RENT (BTR)
volume and regional housebuilders continues The Build To Rent residential sector is NEW DWELLINGS
to drive green field land values, although relatively new to Scotland, with only two 25,000
substantial planning gain contributions can schemes completed to date.
20,000
often significantly reduce the net value
received by the landowner. Scotland has only a 3% share (4,300 units)
Number
150,000
of the UK’s accelerating BTR completions
At Gregory Road, Livingston, a site with and committed development pipeline. The 10,000
consent for 220 housing units received sector is expected to deliver many years of
5,000
seven bids at a recent closing date. growth before reaching maturity as property
0
2008-09 2009-10 2010-11 2011-12 2012/13 2013/14 2014-15 2015-16 2016-17 2017-18 2018-19
Private Housing Association Local Authority Source: Scottish Government Housing Statistics
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 7
OUTLOOK Demand for housing land is expected to remain strong in 2020 as residential sales recover from the slowdown in the latter half of 2019. The BTR pipeline in Scotland will continue to grow as interest in the sector from developers and investors comes to fruition.
CITY CENTRE DEALS CITY CENTRE TAKE UP DEMAND
Office take up in Glasgow city centre for Current demand for the city centre remains
ADDRESS SIZE OCCUPIER SECTOR
2019 totalled 862,000 sq.ft. comprising very positive, particularly from occupiers
(SQ.FT.)
117 deals. This is 4% ahead of the 5-year seeking best in class space. Many occupiers
ONE CENTRAL 272,858 JP MORGAN BANKING average of 827,000 sq.ft. are initiating searches well in advance of their
ARGYLE STREET lease events as they become increasingly
Approximately 40% of the take up comprised aware of the current supply profile.
177 BOTHWELL STREET 64,586 OPUS BUSINESS Grade A transactions, and 60% comprised
CENTRE office space with floorplates in excess of Demand is weighted to larger requirements in
10,000 sq.ft. excess of 15,000 sq.ft. which is consistent with
177 BOTHWELL STREET 48,704 CYBG BANKING the overall take up pattern for previous years.
(VIRGIN MONEY) The headline rental for the city centre
remains £32.50 per sq.ft. (secured at
191 WEST GEORGE STREET 41,665 HILTON HOTEL 177 Bothwell Street). PRIME OFFICE RENTS
RESERVATIONS 35
30
151 WEST GEORGE STREET 30,190 CGI SOFTWARE 25
£ per sq ft
20
ST VINCENT PLAZA 26,910 ARM HOLDINGS SOFTWARE 15
319 ST VINCENT STREET 10
5
0
2015 2016 2017 2018 2019 2020
(projected)
Edinburgh Glasgow Aberdeen
OFFICES
GLASGOW RYDEN SCOTTISH PROPERTY REVIEW 2020 | 9SUPPLY CITY CENTRE NEW BUILDS
The reducing supply of prime office stock in 2020 will see a number of building
ADDRESS SIZE DEVELOPER DELIVERY
Glasgow city centre is stark. Existing Grade refurbishments complete and further
(SQ.FT.) DATE
A supply is all but exhausted with only 6,400 projects start on site.
sq.ft. remaining at 1 West Regent Street. The 2 ATLANTIC SQUARE 96,650 BAM Q3 2020
market will be replenished by three buildings The total vacancy for the city centre is in PROPERTIES/
under construction in the city centre totalling the order of 1.28 million sq.ft, reflecting a TAYLOR CLARK
500,000 sq.ft., although pre lets have been vacancy rate of 6.5%, although this is across
secured for 45% of that new-build office space. all vintages and types of office stock. CADWORKS 94,500 FORE Q3 2021
PARTNERSHIP
Significant refurbishments completed in
2019 were limited to two properties; 151 West SUPPLY AND TAKE UP (CITY WIDE)
177 BOTHWELL STREET 305,000 (81,500 HFD Q3 2021
George Street which has subsequently been 4.0
REMAINING)
let to CGI, and Sentinel, 103 Waterloo Street. 3.5
Completed refurbished stock in excess of 3.0
40,000 sq.ft. is limited to two options. CITY CENTRE REFURBISHMENTS 2020
Million sq.ft.
2.5
2.0
ADDRESS SIZE DEVELOPER DELIVERY
1.5
(SQ.FT.) DATE
1.0
0.5
55 DOUGLAS STREET 85,390 SIGNAL Q1 2020
0
2015 2016 2017 2018 2019
INVESTMENTS
Supply Take-up
THE INK BUILDING, 34,495 AMBASSADOR Q1 2020
DOUGLAS STREET GROUP
ONYX 57,018 CEG Q2 2020
215 BOTHWELL STREET
124 ST VINCENT STREET 36,459 SHELBORN Q4 2020
INVESTMENTS
6 ATLANTIC QUAY 78,459 HORIZON Q1 2021
CAPITAL
50 BOTHWELL STREET 77,325 FORE/KIER SITE START
TBC
THE MET TOWER 120,000 OSBORNE+CO 2021
NORTH HANOVER STREET
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 10GLASGOW’S REDUCED PRIME OFFICE SUPPLY IS EXPECTED TO DRIVE GROWTH TO A NEW HEADLINE RENTAL FOR THE CITY CENTRE.
PERIPHERAL MARKET PERIPHERAL DEALS
Glasgow’s peripheral office market continues
ADDRESS SIZE OCCUPIER SECTOR
to perform well as occupiers benefit from
(SQ.FT.)
cost effective accommodation outwith the
city centre, and higher car parking ratios but SKYPARK 1 7,481 STARTLINE MOTOR CAR FINANCE
within an easy commute of the city centre and FINNIESTON FINANCE
main motorway networks. Available peripheral
supply is tightening. THE ALBUS 6,556 MADE BRAVE BRAND AGENCY
BRIDGETON
Take up in the peripheral market was 56,842
sq.ft. in 47 deals during 2019.
OUT OF TOWN DEALS
OUT OF TOWN MARKET ADDRESS SIZE OCCUPIER SECTOR
Take up in Glasgow’s out of town market (SQ.FT.)
beyond the city boundary was 151,450 sq.ft.
in 44 deals during 2019. CARNBROE HOUSE 25,771 FLAGSHIP PROPERTY PROPERTY
STRATHCLYDE BUSINESS PARK SOLUTIONS (PURCHASER) MANAGEMENT
Extensive supply remains, most noticeably to
the east of the city centre. Of the transactions SOLAIS HOUSE 19,290 KICK ICT (PURCHASER) COMPUTING
secured, a number are owner occupier STRATHCLYDE BUSINESS PARK
purchasers taking advantages of value for
money capital rates per sq.ft. for relatively ONE RUTHERGLEN LINKS 15,751 CLEAR BUSINESS UTILITIES
modern accommodation.
OUTLOOK LUMINA 8,988 BEEKS FINANCIAL CLOUD TECHNOLOGY
Glasgow’s reduced prime office supply is HILLINGTON PARK
expected to drive growth to a new headline
rental for the city centre. Further pre-lets are
anticipated on both the office space currently
under construction and planned.
Current pipeline demand set against the
delivery of new and refurbished space should
continue to reduce available supply.
CURRENT DEMAND FOR
THE CITY CENTRE REMAINS
VERY POSITIVE.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 12OFFICES
EDINBURGH
CITY CENTRE DEALS TAKE UP CITY CENTRE
ADDRESS SIZE OCCUPIER SECTOR In 2019 Edinburgh’s office market delivered Edinburgh’s city centre accounted for 369,894
(SQ.FT.) a total of 628,534 sq.ft. of take up across 154 sq.ft. of office space transacted, representing
deals. This is 25% below the 5-year average 59% of total city activity. Grade A and high
80 GEORGE STREET 40,585 WE WORK SERVICED take up of 837,000 sq.ft. quality accommodation accounted for 135,804
OFFICES sq.ft. or 37% of city centre office take up.
Flexible working is increasingly important
1-7 EXCHANGE CRESCENT 31,364 AMAZON TECHNOLOGY in Edinburgh. Most centres report near full Prime rents for Grade A accommodation
occupancy. We Work (George Street, city are c. £35 per sq.ft. with incentives reducing
centre) and Clockwise (Commercial Quay, to around 12-15 months for a 10-year lease
APEX 2/3 11,713 ILLUMINATE TECHNOLOGY Leith) are the latest entrants and a number commitment to the highest quality covenant.
HAYMARKET TERRACE TECHNOLOGIES of operators continue to scour the city for This tightening of incentives is due to lack
opportunities. As new entrants become of immediate supply.
40 PRINCES STREET 10,978 MULTREES FINANCIAL established the offer is diversifying to include
INVESTORS SERVICES general and specialist centres, and from plug-
and-play to fully serviced. Flexible space is
QUARTERMILE 2 10,122 EPIC GAMES TECHNOLOGY also spinning companies out into the formal
lease market, for example API Software/
Autorek and Money Dashboard both moved
from Codebase to leased space during the
second half of 2019.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 13PERIPHERAL SUPPLY SUPPLY AND TAKE UP
West Edinburgh delivered a total of 173,456 Total office supply across Edinburgh at 2.5
sq.ft. of office space transacted across 14 end Q4 2019 was 1,489,246 sq.ft., reflecting
deals in 2019. Prime rents are around £20 per a city-wide office vacancy rate of 5.7%. 2.0
sq.ft. for refurbished options in the South Gyle Of this, 550,815 sq.ft. (37%) is Grade A
Million sq.ft.
1.5
area. This rises to above £23 per sq.ft. for or good quality refurbished Grade B space.
refurbished Grade A space on Edinburgh Park. 1.0
Edinburgh’s current city office development
Across North Edinburgh a total of 34,224 pipeline is expected see much needed Grade 0.5
sq.ft. of office space was transacted in 10 A office supply delivered in both the core city
0
deals during 2019. Prime rents are currently centre and prime West Edinburgh through 2015 2016 2017 2018 2019
sitting at around £18 per sq.ft. 2020-2022. Supply Take-up
PERIPHERAL DEALS
ADDRESS SIZE OCCUPIER SECTOR
(SQ.FT.)
LINKS HOUSE 6,724 UPWARD CHARITY
LINKS PLACE MOBILITY
1 LEITH WALK 6,383 SOCIAL BITE FOOD &
BEVERAGE
GREAT MICHAEL HOUSE 4,936 SITEKIT TECHNOLOGY
LINKS PLACE
WESTFIELD HOUSE 48,614 CHURCH OF INSTITUTION
26 WESTFIELD ROAD SCIENTOLOGY
BROADSTONE 35,608 INSTANT OFFICES SERVICED
SOUTH GYLE CRESCENT OFFICES
FORTHSTONE 35,261 MOTABILITY CHARITY
SOUTH GYLE CRESCENT
12 LOCHSIDE PLACE 11,849 KEYSIGHT TECHNOLOGY
TECHNOLOGIES
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 14CITY CENTRE NEW BUILDS OUTLOOK
Edinburgh’s lack of speculative office Tight Grade A office supply and an uneasy
ADDRESS SIZE DEVELOPER DELIVERY
development of any scale has driven Grade market encouraged occupiers to renew
(SQ.FT.) DATE
A supply to record lows. This undersupply existing leases rather than relocate during
CAPITAL SQUARE 54,012 (50% BAM PROPERTIES/ Q2 2020 is creating upwards pressure on prime rents, 2019. Greater political clarity and new office
62 MORRISON STREET PRE-LET) HERMES with record levels anticipated. site starts are expected to now align with
continuing demand and encourage pre-letting.
2 FREER STREET 59,554 VASTINT Q2 2021 As identified in Ryden’s market analysis
for Edinburgh’s City Plan 2030, office Lease renewals should also continue though,
THE HAYMARKET (PHASE 1) 110,000 M&G REAL ESTATE Q4 2021 development land in the city centre is as will Grade A/B refurbishments to deal with
a challenge. New destinations require the necessary upgrading of the city’s ageing
EXCHANGE PLACE 4 18,840 EP3 DEVCO Q1 2022 to be evolved, supported by investment office stock at more affordable rents than
in infrastructure and transportation links. new-build Grade A.
WEST EDINBURGH NEW BUILDS
ADDRESS SIZE DEVELOPER DELIVERY
(SQ.FT.) DATE
1 NEW PARK SQUARE 85,000 PARABOLA Q4 2021
EDINBURGH PARK
AS IDENTIFIED IN RYDEN’S
MARKET ANALYSIS FOR
EDINBURGH’S CITY PLAN 2030,
OFFICE DEVELOPMENT
LAND IN THE CITY CENTRE
IS A CHALLENGE.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 15DEALS TAKE UP SUPPLY
Aberdeen’s improving economy around a Aberdeen’s office supply has fallen by 15%
ADDRESS SIZE OCCUPIER SECTOR
more stable oil price has fuelled an increase over 2 years to 2.42 million sq.ft. This is due
(SQ.FT.)
in demand for office accommodation. Take to the combined effects of the rising take up,
DEEPWATER HOUSE 76,620 TAQA BRATANI OIL & GAS up for the year was 514,000 sq.ft. This is 45% a lack of new development and the demolition
PRIMEFOUR up on 2018 and heading towards the city’s of some buildings such as Silverburn House
KINGSWELLS 5-year average take up of 558,000 sq.ft. and at Kirkhill Business Park. The 2.42 million
sq.ft. supply still reflects a high vacancy rate of
B3 51,356 OCEANEERING OIL & GAS Grade A offices within the city centre are 13.5% and there are many further redundant
ABERDEEN BUSINESS PARK filling up. The Capitol is fully let and Marischal office properties, a number of which are under
DYCE Square is now 75% let, having attracted new consideration for demolition or conversion
tenants EY, Chevron and KPMG. to alternative use.
PAVILION 4 15,394 BORR DRILLING OIL & GAS
WESTPOINT The majority of office deals in 2019 were There is virtually no planned new office
WESTHILL smaller, with only 13 in excess of 10,000 sq.ft. development. One exception is on the city
The largest deal was at Primefour where TAQA periphery, where developer Knight Property
1 ALBYN PLACE 14,148 ADD ENERGY OIL & GAS Bratani took over Transocean’s standalone Group is currently on site delivering two
76,620 sq.ft. building. Transocean will remain new office pavilions totalling 20,000 sq.ft.
MARISCHAL SQUARE 9,507 EY OIL & GAS at Primefour, having downsized to 28,000 sq.ft. at Kingshill Business Park at Westhill.
BROAD STREET 9,509 CHEVRON within Lloyds Register’s building Prime View.
11,846 KPMG OUTLOOK
Barring any unforeseen major issues in the
SUPPLY AND TAKE UP energy industry, a continuation of stable
3.5 office demand and further falling supply is
3.0 anticipated. Take up is unlikely to increase
2.5 significantly, but the market is now back on
DEVELOPER KNIGHT PROPERTY GROUP IS CURRENTLY ON an even keel with the number of requirements
Million sq.ft.
2.0
SITE DELIVERING TWO NEW OFFICE PAVILIONS TOTALLING up and more deals being converted.
1.5
20,000 SQ.FT. AT KINGSHILL BUSINESS PARK. 1.0 2019’s fall in supply should continue
0.5 throughout 2020 as it is unlikely that any
0 further new build projects will be on site
2015 2016 2017 2018 2019
this year.
Supply Take-up
OFFICES
Prime rents are £32.50 per sq.ft. and are
likely to remain at that level supported
by large incentives.
ABERDEEN RYDEN SCOTTISH PROPERTY REVIEW 2020 | 16INDUSTRIAL
GLASGOW AND
WEST OF SCOTLAND
TAKE UP DEALS
Despite weak economic growth and political Discussions are also progressing on two
ADDRESS SIZE TENANT SECTOR
headwinds, the Glasgow and West of Scotland further major pre-lets which are expected
(SQ.FT.)
industrial market is enjoying a purple patch for to conclude this quarter.
pre-let and bespoke (purpose-built) deals. A UNIT 606 CLYDE GATEWAY EAST 49,948 NETWORK TRANSPORT
number have still to conclude, but the market Many larger deals have been lease renewals. RAIL
has transitioned from supply-led to one where Amazon extended the lease on its 300,000
turnkey solutions are driving new development. sq.ft. fulfilment centre in Gourock following UNIT 605 CLYDE GATEWAY EAST 13,770 EDEN MILL FOOD & DRINK
a rental dispute with the landlord. Similarly, DISTILLERS
Rising demand for discount groceries is Doosan Babcock committed to stay in 350,000
driving the market. Lidl has opened its largest sq.ft. at Westway Park for a further 15 years. BUILDING 2 INCHINNAN ROAD 36,300 TRADEBE WASTE
UK regional distribution centre (624,000 At Queenslie, Soapworks extended on 79,000 BELLSHILL MANAGEMENT
sq.ft.) at Eurocentral; this is also Scotland’s sq.ft. and Marine Products Scotland on 47,000
largest bespoke build for a number of sq.ft. At Eurocentral, Mentholatum are staying COLOSSUS 2 94,178 HERMES LOGISTICS
years. Farmfoods has expanded, enlarging in the 64,000 sq.ft. Pegasus building. EUROCENTRAL
its existing Cumbernauld headquarters
by 192,000 sq.ft. At Westway in Renfrew, PLOT 4 CLYDE GATEWAY EAST 50,034 DHL LOGISTICS
Filshill are taking a 120,000 sq.ft. new build
unit to expand their wholesale offer. WESTWAY 120,400 FILLSHILL RETAIL
Also in the logistics sector, DHL’s newest CARTSIDE AVENUE 20,000 VASCUTEK HEALTHCARE
THE GLASGOW AND WEST OF
parcel unit (50,034 sq.ft.) is well under way
SCOTLAND INDUSTRIAL MARKET UNIT 201 27,448 TORISHIMA MANUFACTURING
at Clyde Gateway East by Harris Finance.
IS ENJOYING A PURPLE PATCH
FOR PRE-LET AND BESPOKE
(PURPOSE BUILT) DEALS.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 17SUPPLY RENTS
The market has reached its lowest level of New development and scarcity are driving
availability. Vacant industrial property accounts rental growth. According to CoStar, the
for 3.7% of stock. Against average annual average rent across the entire leased stock
take up of 3,021,743 sq.ft. this equates to only is now £5.13 per sq.ft. with annual growth
1.26 years of supply (or 2.15 years, including of 2.2%.
available properties not marketed).
Recent Ryden deals indicate various data
A proportion of the remaining stock is providers are underestimating growth.
obsolete and, although building age This may be due to a lag in reporting and
is not a definitive guide to obsolescence, the averaging across what is a very large
it is interesting to note that nearly 50% market. Within popular areas it is common to
was built pre-1980s. see rental rises of 20%-50% at review/renewal.
Speculative development remains at a low Despite such increases, industrial property
volume, but some projects have been put remains a relatively cheap form of business
to one side in order to pursue larger pre-let space and occupiers are largely accepting
opportunities. This is positive but will limit the need for an increase after many years
the availability of small to medium sized of static rents.
units. Hillington Park and Eurocentral are the
focus of potential speculative development A consequence of rent rises is the
of significant scale with designs advancing extraordinary position whereby some
at both locations. outmoded retail parks with the correct
location and layout have greater prospects
The industrial stock in West Central Scotland as industrial estates, potentially including
is growing again as construction comes on fulfilment for online retailing.
stream mainly to satisfy rising pre-let and
bespoke requirements from the e-commerce
and the logistics sector. There is rising
developer and investor interest in speculative
development in the best locations. There
are also fewer outmoded premises now to
demolish, but this could rise again if more
stringent environmental regulations accelerate
the obsolescence of the poorest stock. This
would be positive for the overall standard
of stock but marginal businesses will find
it increasingly difficult to secure premises.
WITHIN POPULAR AREAS
IT IS COMMON TO SEE RENTAL
RISES OF 20%-50%
AT REVIEW/RENEWAL.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 18OUTLOOK Further tightening of Glasgow’s industrial supply is expected in 2020. This is positive for rental growth and investment potential, but is constraining business expansion – Ryden receives calls on a daily basis from businesses unable to identify premises. Even a modest improvement in the economy would leave Glasgow unable to meet demand in the short term. The market continues to be very active but requires the creation of more new industrial space to accommodate business growth. Market analysis is underestimating rental growth. In the absence of a recession or further political challenge, new supply will be both higher cost and of insufficient scale at a market level to suppress rents, particularly as the occupier base for high quality industrial premises is deepening to include new types of business. The lack of serviced development sites and the requirement to focus on smaller scale infills will also constrain the market.
TAKE UP Obsolescence remains the major problem,
The Edinburgh and East of Scotland as many properties are increasingly unsuitable
industrial property market had a challenging for modern occupiers. 2019 did bring the
2019. However the market remains resilient, completion of 6 newly constructed estates,
underpinned by record low vacancy rate and including Seven Hills Business Park in
the prospect of rental growth. Edinburgh, Barons Court in Grangemouth
and an extension of Shairps Business Park
The volume of letting activity in 2019 was at Livingston Trade Park, together providing
reduced by 30%, at 174 transactions compared approximately 295,000 sq.ft. of new stock.
to 247 in 2018. The volume of floorspace There is also an estimated 143,700 sq.ft. of
transacted fell more sharply by 35% to 894,392 industrial space currently under construction
sq.ft., to reach its lowest level since 2009. which is due to complete during 2020.
Occupiers became increasingly risk averse RENTS
during 2019 and larger transactions fell away Prime rents remain at £9-£10 per sq.ft. for
– there were only two lettings larger than properties in the best locations or with road
10,000 sq.ft. during the second half of the year side prominence or yard space. Rental growth
– as the political backcloth and selectivity on is however still evident across the majority
location, rents, specification and non-domestic of the market, due largely to lack of supply
rates all suppressed demand. but also landlords carrying out good quality
refurbishments and/or reconfigurations.
SUPPLY
Despite these challenges, vacancies are at Prime trade counter rents have reached in
record low levels. The vacancy rate of 4.9% excess of £10 per sq.ft., however this is very
has steadily reduced from a high of 9.8% in location specific. Overall there is a notable
2012. Supply of floorspace year-on-year has reduction in trade counter activity as many
fallen from 5.3 million sq.ft. in 2012 to 4.8 established operators are well represented
million sq.ft. at the end of 2019. and there are few new market entrants.
OBSOLESCENCE REMAINS
THE MAJOR PROBLEM,
AS MANY PROPERTIES ARE
EDINBURGH AND INCREASINGLY UNSUITABLE
FOR MODERN OCCUPIERS.
EAST OF SCOTLAND
INDUSTRIAL RYDEN SCOTTISH PROPERTY REVIEW 2020 | 20DEALS OUTLOOK
The expectation is for improved market
ADDRESS SIZE (SQ.FT.) OCCUPIER SECTOR
confidence in 2020. Rental growth should
M8 J3A 240,996 MALCOLM LOGISTICS LOGISTICS become more widespread, although heavily
BATHGATE influenced by the quality of stock as many
properties require extensive refurbishment.
UNIT F QUEEN ANNE DRIVE 26,388 R DRUMMOND CARRIERS LTD DISTRIBUTION Faced with rising costs, occupiers will review
NEWBRIDGE their requirements and some may seek to
combine office, showroom and industrial
1 HUTTON SQUARE 19,476 POLYSOL LTD MANUFACTURING uses under one roof. Demand for larger
BRUCEFIELD INDUSTRY PARK warehouses will be linked to ongoing
LIVINGSTON change in the retail sector.
BELLEKNOWES INDUSTRIAL ESTATE 13,876 PICT OFFSHORE LTD ENGINEERING Edinburgh’s traditional urban industrial
INVERKEITHING estates will continue to disappear, making
way for mainly residential development. This
WESTERTON ROAD 9,836 APC OVERNIGHT LOGISTICS will tighten the market and force occupiers to
EAST MAINS INDUSTRIAL ESTATE look further afield. Loanhead was previously
BROXBURN the preferred option, however its estates are
now also reaching capacity. Locations such
as West Lothian and Fife may now benefit.
Ryden’s report for the forthcoming Edinburgh
City Plan 2030 examines these imminent
locational choices.
RENTAL GROWTH SHOULD
BECOME MORE WIDESPREAD,
ALTHOUGH HEAVILY INFLUENCED
BY THE QUALITY OF STOCK AS
MANY PROPERTIES REQUIRE
EXTENSIVE REFURBISHMENT.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 21INDUSTRIAL
ABERDEEN
TAKE UP DEALS
Take up of industrial property in Aberdeen
ADDRESS SIZE (SQ.FT.) OCCUPIER SECTOR
nearly doubled from the first half to the
second half of 2019. Annual take up totalled D2 BUSINESS PARK 88,050 OCEANEERING OIL & GAS
709,715 sq.ft., reflecting a 7% increase on DYCE DRIVE
2018 and 20% above the 5-year average DYCE
of 588,331 sq.ft.
FORUM HOUSE 54,666 ACTEON OIL & GAS
The 91 lettings recorded in 2019 was PEREGRINE ROAD GROUP
the highest total of the decade. Smaller WESTHILL
transactions continued to dominate
the market, with 80% of lettings below THE CORE 3 27,000 BILFINGER ENGINEERING
10,000 sq.ft. CORE BUSINESS PARK SERVICES
UNIT 8 25,743 HYDRATIGHT OIL & GAS
KIRKHILL PLACE
DYCE
UNIT 7A 20,645 ETHOS OIL & GAS
INTERNATIONAL AVENUE ENERGY (GBR)
ABZ BUSINESS PARK LTD
DYCE
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 22SUPPLY RENTS
Industrial supply in Aberdeen at the end of The Aberdeen industrial market differs from
2019 totalled 2.83 million sq.ft., reflecting a elsewhere in the country in that the office,
19% rise year-on-year. A significant proportion warehouse and yard elements of a building
of this marketed stock is however approaching are all rentalised separately at £9 per sq.ft. for
obsolescence. It is generally good quality new warehousing, £19 per sq.ft. for offices and £2 THE IMPROVING MARKET
build and extensively refurbished space that is per sq.ft. for concrete yards. Occupiers are SENTIMENT HAS ENCOURAGED
transacting. Although the city-wide industrial now seeking lower office contents (20-25%) A NUMBER OF DEVELOPERS TO
vacancy rate across all grades of property is compared with typically 30-35% in the past.
ONCE AGAIN PRESS AHEAD WITH
7.3%, less than 100,000 sq.ft. of new build As a result, landlords and developers are now
stock is presently available. reducing office contents to attract occupiers SPECULATIVE DEVELOPMENT.
and reduce the overall rental cost.
OUTLOOK
Strongly rising take up and very limited new
build supply is improving market sentiment.
This has encouraged a number of developers
to once again press ahead with speculative
development.
SPECULATIVE DEVELOPMENT
ADDRESS SIZE (SQ.FT.) DEVELOPER DELIVERY DATE
UNITS 8, 9 & 10 UNIT 8: 9,580 KNIGHT PROPERTY GROUP CONSTRUCTION TO
KINGSHILL COMMERCIAL PARK UNIT 9: 11,840 COMMENCE SHORTLY
WESTHILL UNIT 10: 12,379
ALTENS TRADE PARK UNITS 1 & 2: 7,666 KNIGHT PROPERTY GROUP CONSTRUCTION COMPLETE.
SOUTERHEAD ROAD UNITS 3 & 4: 4,006 UNITS 3 AND 4 ARE
ALTENS UNITS 5 & 6: 1,522 UNDER OFFER
UNITS 1-15 15 UNITS OF 2,500 ABZ DEVELOPMENTS LTD PHASE 1 – CLOSE TO
ABZ BUSINESS PARK COMPLETION. PHASE 2 –
DYCE CONSTRUCTION TO
COMMENCE SHORTLY
9A 18,138 ABZ DEVELOPMENTS LTD CONSTRUCTION TO
ABZ BUSINESS PARK COMMENCE SHORTLY
DYCE
SALTIRE BUSINESS PARK 7 UNITS TOTALLING 13,146 SALTIRE DEVELOPMENTS CONSTRUCTION TO
BADENTOY COMPLETE SHORTLY
PORTLETHEN
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 23The Scottish Retail The continued growth of online sales and
reduction in the requirement from retailers for
The discount sector continues to expand,
although it can have an out of town bias.
redevelopment and deliver town centre activity,
including residential uses. For example the
Consortium/KPMG report physical stores is not a new phenomenon. Active retailers such as Home Bargains, landlords of The Oak Mall Shopping Centre in
However, the continued year on year impact B&M, Iceland (Food Warehouse), Lidl and Greenock have lodged an application for the
that in December 2019 on town centres and shopping centres is Aldi pick and choose locations, including voids demolition of part of the centre to make way
compounding concerns over how to repurpose in retail parks. Further opportunities for those for residential development to provide 146
total sales rose by 0.4% vacant space. occupiers may arise from the demise of the apartments in the town centre.
year-on-year, although Over the 11 months to the end of November
likes of Mothercare and Mamas & Papas.
Edinburgh St James has announced further
analysis across both 2019, 81 retailers fell into administration Major landlords have been forced to consider lettings in advance of the planned opening
according to KPMG. This included brands repurposing of properties. Examples include of the retail and leisure elements in October
November and December such as LK Bennett, Jack Wills, Karen the former Edinburgh BHS where LaSalle 2020 (a cinema and hotels will open in 2021).
to adjust for the date Millen, Links of London, Bon Marche,
Bathstore, Jessops, Clinton’s, Thomas Cook
Investment Management is redeveloping the
Princes Street store for a new Premier Inn
Along with previous announcements and
the John Lewis anchor store, recent deals
of Black Friday shows and Oddbins. Further major retailers have
announced closures with Boots to close 200
hotel together with retail and restaurant space
below. Also on Princes Street, the former
include Next who will relocate from Princes
Street. Responding to this shift in the prime
a 0.9% fall. stores and Arcadia to close 23 stores across House of Fraser is to be redeveloped for shopping pitch, City of Edinburgh Council’s
Top Shop, Top Man and Dorothy Perkins. the Johnny Walker Scotch Whisky attraction Choices for City Plan 2030 report proposes
by Diageo. In Glasgow, the former BHS on relaxation of use restrictions in the west end
Department stores have not escaped the Sauchiehall Street is to be redeveloped for of Princes Street.
trend, with Debenhams following BHS with mixed use office and retail accommodation,
store closures (including in Kirkcaldy) together albeit this development has yet to commence. Ryden’s retail rent index monitors prime
with House of Fraser in Edinburgh and Watts pitches across Scotland’s top twenty city, town
Brothers in Glasgow leading to large scale These are of course major city centres. The and shopping centres. While the index shows
vacancies within town centres. In addition, challenge of repurposing Scotland’s many 6.8% nominal growth over the past five years,
Marks & Spencer is another large space town centres is more acute. Leisure reuses this is concentrated in the largest destination
occupier working on closures with 100 such as cafes and restaurants continue to centres and in real terms after price inflation
planned across the UK. invest, but the market is past its peak and, prime rents have fallen by 1.0%. This is a
like discounters, may also favour drive-thru/ comparatively resilient performance though
out of town. Some town centres are now when considered against more general rental
appraising a much wider mix of uses to attract falls across the retail sector.
RETAIL AND THE DISCOUNT SECTOR CONTINUES
TO EXPAND, ALTHOUGH IT CAN
LEISURE
HAVE AN OUT OF TOWN BIAS.
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 24OUTLOOK
Although some discount retailer and food
& beverage operators are expanding,
this is across a mix of locations and is
not offsetting the larger number who are
shedding floorspace.
While there will continue to be a strong
physical presence, particularly in prime
destinations, reshaping retail space alongside
alternative uses is likely to dominate activity
for many years to come.
RETAIL INDEX (TOP 20 TOWNS)
110
105
100
95
90
85
80
2015 2016 2017 2018 2019
Retail index CPI
ADDRESS SIZE (SQ.FT.) OCCUPIER SECTOR
18/20 ROYAL EXCHANGE SQUARE 2,700 LULU LEMON ATHLETIC APPAREL
GLASGOW
BUCHANAN GALLERIES 10,000 SCHUH FOOTWEAR
GLASGOW
EDINBURGH ST JAMES 37,000 ZARA FASHION
5,700 THE ALCHEMIST RESTAURANT
120A PRINCES STREET 4,600 POUNDLAND DISCOUNT RETAILER
EDINBURGH
TRINITY CENTRE 4,781 TOYTOWN TOY STORE
ABERDEEN
BON ACCORD CENTRE 4,400 JACK WILLIS FASHION
ABERDEEN
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 25INVESTMENT
OVERVIEW ALTERNATIVES
The Scottish commercial property investment Investment sentiment has shifted in recent and have funded Drum Property Group’s
market was again subjected to political years to favour ‘alternatives’ such as Purpose development of 324 apartments at Buchanan
interference in 2019, largely due to the Built Student Accommodation (PBSA), Wharf, Glasgow and also S1’s Skyliner
continued saga of Brexit. Brexit affected all hotels, infrastructure and income-producing development in Leith which is to comprise
UK financial markets though, so for seasoned residential sectors including Build to Rent 338 apartments. A number of other
property investors the attraction of bricks and (BTR) residential. Investors are attracted by developments and forward funding
mortar remained, despite the recent trend of the long leases often attainable, higher returns transactions are under consideration.
falling returns. Activity was heightened when from operational assets and a perception of
good quality office and industrial properties greater defensive qualities in a downturn. Despite the surge in the number of hotel rooms
were brought to the market. Low interest rates in Scotland’s main cities and the resultant
also helped to maintain property’s appeal, There is a willingness to invest at scale. fall in revenue per available room (Rev par),
although banks have tightened their debt One third of full time students live in PBSA the sector remains extremely popular with
offer on riskier situations. Overseas investors and the UK sector is estimated to be worth in investors. Long leases are a significant driver
were again keen bidders when it came to the excess of £50 billion. Specialists dominate the although operational assets in Edinburgh
larger lots, attracted by a favourable exchange sectors: Unite recently acquired Liberty Living and Glasgow are also of interest to more
rate and the comparatively generous yields for £1.4 billion and Straits (SPH) acquired sophisticated investors. The funding of Artisan
on offer. 7 assets (2,383 beds) from Student Castle Real Estate Investor’s hotel and apart hotel
for £411 million. In Scotland, Hines acquired scheme in Glasgow by Union Investments
Towards the end of 2019 the market slowed a 607-bed PBSA development in Glasgow Real Estate is a significant transaction and
as the UK General Election approached, with from Bricks for £72 million, reflecting a capital also a resounding vote of confidence
buyers and sellers waiting in the sidelines rate of c. £119,000 per bed. in the city.
to gauge the outcome.
Allocation of capital into residential has
promoted BTR from niche to become an ALTERNATIVES DEALS
established sub sector of the UK institutional ADDRESS PROPERTY PURCHASER
property market. Activity has been slow to
materialise in Scotland, however there are CUSTOM HOUSE TWO HOTEL DEVELOPMENT – UNION
now a growing number of investors targeting GLASGOW PRE-LETS TO CLAYTON (DALATA) FOR INVESTMENTS
projects in Edinburgh and Glasgow. Key A 294 BEDROOM HOTEL AND A 162 REAL ESTATE GMBH
drivers include the outperformance of the BEDROOM APARTHOTEL BY ADAGIO (FORWARD FUNDING
Scottish housing market, the systemic under OF c. £78.5 MILLION)
supply of new housing across all tenures and
the growing number of renters. Legal
and General have made an early impact
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 26OFFICES
Transactional activity for 2019 belied the buyers most active. Otherwise, property
uncertain political climate, with large office companies were the dominant buyers, taking
investment transactions in all three major advantage of the scarcity of institutional
cities. Active occupational markets drove investors to pick up quality assets and those
investor demand in Edinburgh and Glasgow, with value-add potential.
providing buyers with strong rental growth
prospects in a context of historically low levels Prime office yields in Edinburgh & Glasgow
of availability. The Aberdeen market provides remain at 5.0-5.25%, with Aberdeen
fewer occupational fireworks currently, but does closer to 6.75-7.0%.
provide investors with high quality assets let on
long leases, available at attractive income yields. There are tentative signs of recovery in the out
of town office sector, as investors start to pick
Investor demand was polarised in 2019, with up the signs of occupational activity rippling
prime assets above £20m most likely to be out from city centre markets, although they
acquired by overseas investors, and Korean remain highly selective.
OFFICE DEALS
ADDRESS PROPERTY PURCHASER
123 ST VINCENT STREET FULLY LET MULTI-OCCUPIED GRADE LONGMEAD CAPITAL FOR £37.75 MILLION
GLASGOW B LISTED BUILDING OF 134,517 SQ.FT. (7.57%)
WAULT OF 5.25 YEARS
110 ST VINCENT STREET GRADE A LISTED BUILDING OF 96,751 KOREAN CLIENT OF KNIGHT FRANK
GLASGOW SQ.FT. LET UNTIL JUNE 2027 INVESTMENT MANAGEMENT FOR £48.4
MILLION (5.4%)
EXCHANGE PLAZA MULTI-LET BUILDING OF c. 101,227 SQ.FT. CLIENTS OF M&G REAL ESTATE FOR
LOTHIAN ROAD WAULT OF c. 7.5 YEARS TO BREAKS £54 MILLION (5.32%)
EDINBURGH
THE LEONARDO INNOVATION HUB SINGLE-LET R&D FACILITY c. 15 SOUTH KOREAN CLIENTS OF KFIM FOR
CREWE TOLL YEAR INFLATION LINKED INCOME. c. £100 MILLION (5.91%)
EDINBURGH APPROXIMATELY 439,000 SQ.FT. BUILDING
ON 16 ACRE SITE
SIR IAN WOOD HOUSE MODERN GRADE A OFFICE BUILDING LCN CAPITAL PARTNERS FOR c. £80
ALTENS EXTENDING TO 216,000 SQ.FT. LET TO MILLION (7.00%)
ABERDEEN WOOD GROUP ON A NEW 15 YEAR LEASE
BUILDING 3 61,215 SQ.FT. GRADE A OFFICES, CLIENTS OF BLACKSAND FOR £22.4
ENTERPRISE DRIVE PURPOSE-BUILT IN 2013, LET TO TECHNIP MILLION (6.70%)
WESTHILL UK LIMITED WITH 14 YEARS UNEXPIRED
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 27Across Scotland as INDUSTRIAL DEALS
ADDRESS PROPERTY PURCHASER
a whole the industrial
sector generated the BREWDOG
EUROCENTRAL
PRIME DISTRIBUTION UNIT OF 129,183 SQ.FT. LET
TO BREWDOG PLC FOR 20 YEARS (NO BREAKS)
CBRE GLOBAL INVESTORS FOR
£15M (5.04%)
greatest demand from WESTERN CAMPUS MODERN MULTI-LET ESTATE OF 44,200 SQ.FT. STENPROP FOR £4.6M, (5.5%) WITH
investors in 2019. STRATHCLYDE BUSINESS PARK ACROSS 15 UNITS. 75% LET EXPECTED REVERSION (TO c. 7.5%)
BELLSHILL UPON LETTING OF VACANT UNITS.
Transactional activity was
ROYAL MAIL SORTING WAREHOUSE 215,745 SQ.FT. IN-TOWN SORTING OFFICE HINES GLOBAL INCOME TRUST
encouraging in the three CULTINS ROAD AND LOGISTICS FACILITY ON 12.9 ACRE SITE. c. £25.46 MILLION (5.25%)
principal cities, despite EDINBURGH LET TO MAY 2030
wider political and 22 SEAFIELD ROAD EAST
EDINBURGH
20,631 SQ.FT. CAR SHOWROOM ON 1.19
ACRE SITE. LET TO VERTU MOTORS UNTIL
BUCCLEUCH PROPERTY FOR
£2.1 MILLION (7.17%)
economic uncertainties. NOVEMBER 2023
HARVEST AVENUE PURPOSE-BUILT INDUSTRIAL FACILITY GLOBAL GATE CAPITAL FOR
D2 BUSINESS PARK EXTENDING TO 88,000 SQ.FT., PRE-LET TO £11.5 MILLION (7.60%). FORWARD
DYCE, ABERDEEN OCEANEERING INTERNATIONAL SERVICES LTD FUNDING
INDUSTRIAL FOR 15 YEARS
Demand for multi-let industrial assets
from property companies remained strong BADENTOY NORTH 68,000 SQ.FT. LET TO SCHLUMBERGER OILFIELD STANDARD LIFE INVESTMENTS
throughout the year, although the number PORTLETHEN UK PLC UNTIL FEBRUARY 2030 WITH A TENANT PROPERTY INCOME TRUST FOR
of completed transactions was reduced ABERDEEN ONLY BREAK OPTION IN FEBRUARY 2028 £13.55 MILLION (7.90%)
from 2018. Larger single-let industrial and
distribution sheds offering secure income were
also sought after and mainly snapped up by
overseas investors. Interest from UK funds
remained subdued, although by year end
two notable deals had completed.
Scotland continues to offer good yield value
for industrial stock compared to England
where the market has become overheated
INVESTMENT TRACKER
in some locations. Decent quality rack rented
Number of investment transactions over
multi-let estates are generally trading in the
£1 million in Scotland.
order of 6-7% in Glasgow and Edinburgh,
while yields of 8-9% are more the norm 200
in Aberdeen. The yield differences between
the cities will be determined by a number 150
of factors although rental growth prospects
Number
in the locality will be significant. Yield 100
differentials are also evident in single
let transactions with long let properties 50
trading for 5-6% in Glasgow and Edinburgh
compared to 6.5-7.0% in Aberdeen.
0
2015 2016 2017 2018 2019
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 28RETAIL AND LEISURE
Investor activity in the retail property exposure to the sector, leading to some forced strong performance and liquidity against
investment sector was well below average selling of assets to help balance liquidity the background of tight occupier markets.
in 2019. The sector continues to experience requirements. Consequently, yields for retail Aberdeen’s resilient economy and positive
volatility as structural change to the retail warehousing and shopping centres have take up trend should attract greater interest, THE ALTERNATIVE PROPERTY
environment impacts on retailers. Unlike softened as prices have fallen. although investors will still look for a yield INVESTMENT SECTOR IS WELL
in the industrial sector, investors took full discount. The alternative property investment PLACED TO GROW, AS CAPITAL
account of the political and economic OUTLOOK sector is well placed to grow, as capital ALLOCATIONS AND THE SEARCH
climate in the volatile retail sector, and There is talk of a bounce in the market allocations and the search for sustainable
FOR SUSTAINABLE INCOME FUEL
were ultra-cautious. following the clarity provided by the UK income fuel an increase in development and
General Election. For Scotland this is funding activity. A soft bounce is anticipated AN INCREASE IN DEVELOPMENT
Some areas were however active, with yields tempered by the ongoing constitutional debate, in the retail sector as investors sense the AND FUNDING ACTIVITY.
holding firm. Private investors remained keen although the next stage of Brexit is the more bottom of the market for certain parts of the
to acquire well-let smaller properties, largely likely external factor to influence markets in High Street and possibly some sub sectors
led by the convenience operators who continue 2020, and that of course will be felt UK-wide. such as retail warehousing. The focus for retail
to trade well and typically acquire property though will continue to be on covenant and
on longer lease terms with index linked rent Investor demand between Scotland’s cities is lease length and it is likely that the large gap
reviews. Funds and larger property companies unlikely to change significantly in the coming between prime and secondary assets
faced a different dilemma with falling demand year. Prime office and industrial opportunities will remain.
for larger properties and a general over in Edinburgh and Glasgow should provide
RETAIL DEALS
ADDRESS PROPERTY PURCHASER
SAUCHIEHALL BUILDING 309,000 SQ.FT. RETAIL BLOCK WITH MULTI-STOREY ARBAH CAPITAL ON AN SPV
165-197 SAUCHIEHALL STREET CAR PARK BASIS FOR £55 MILLION (6.3%)
GLASGOW
STOCK EXCHANGE HOUSE 57,190 SQ.FT. CATEGORY A LISTED FULLY LET AEW EUROPE FOR £33 MILLION
153-159 BUCHANAN STREET & 6-11 TO NINE TENANTS (c. 5%)
NELSON MANDELA PLACE
GLASGOW
67 & 69 GEORGE STREET MULTI-LET, 11,894 SQ.FT. MIXED-USE OFFICE KNIGHT PROPERTY FOR £8.25
EDINBURGH AND RETAIL MILLION (6.44%)
60 PRINCES STREET LEASED TO M&S PLC WITH c. 67 YEARS UNEXPIRED, EWM GROUP FOR £12.3 MILLION
EDINBURGH UPWARD ONLY OPEN MARKET REVIEWS. EXTENDS (3.96%)
TO c. 23,310 SQ.FT.
BRIDGE OF DON RETAIL PARK PRIME MULTI-LET RETAIL PARK EXTENDING TO 82,000 GREENRIDGE INVESTMENT
ABERDEEN SQ.FT. WITH WAULT OF 11.5 YEARS TO BREAKS MANAGEMENT FOR £14.25
MILLION (7.57%)
RYDEN SCOTTISH PROPERTY REVIEW 2020 | 29EDINBURGH
7 Exchange Crescent
Conference Square
EH3 8AN
0131 225 6612
GLASGOW
130 St Vincent Street
G2 5HF
0141 204 3838
ABERDEEN
25 Albyn Place
AB10 1YL
01224 588866
LEEDS
3rd Floor Carlton Tower
34 St Pauls Street
LS1 2QB
0113 243 6777
LONDON
4th Floor Langham House
302-308 Regent Street
W1B 3AT
020 7436 1212
MANCHESTER
2nd Floor
28 King Street
M2 6AY
0161 249 9778
DR MARK ROBERTSON
Managing Partner
mark.robertson@ryden.co.uk
KAREN FORSYTH
Research Manager
karen.forsyth@ryden.co.uk
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