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Commercial Property News For Scotland - December 2011
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Looking for deals
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| Apart from the active oil driven
office market in Aberdeen, the
main Scottish cities of Glasgow
and Edinburgh have been steady
and unspectacular.
For the property industry it is
a grind in the face of lack of
finance, shortage of new
development and cautious
occupiers beset by concerns for
a whole range of problems, from
debt reduction in the UK to the
saga of the euro.
Craig Watson of Jones Lang
LaSalle commented: “It has been
a tough year in Edinburgh and
without a larger letting such as
occurred in 2010 to Tesco, the
take up will be just below
average this year.”
“The market is driven by
competitive deals with occupiers
in Edinburgh focusing on the
benchmark of £275.20 a sq.metre.
The number of enquiries has
been steady throughout the
year, but the delivery time on
transactions is longer and can be
12 months.”
Watson noted that there is
only one major scheme,
provisionally known as Site HI,
of 17,279 sq.metres due to be
delivered in Edinburgh in the
next 15 months (Q1, 2013).
In its report on Scottish
property, Ryden talks of “the
near absence of new office
development since 2008.” Take
up in the 12 month period to
September 2011 totalled 55,043
sq.metres, 17% below the previous
12 months and a full 27% down
on the 10 year average.
Interestingly, Ryden said
“despite the slowdown, office
requirements from larger corporates
seeking quality premises of over
929 sq.metres in the city centre
remain encouraging.”
So it is far from being a totally
dismal picture because the agent
said that developers are getting
planning permission for schemes
that can be pre let. It added that
“the development gap provides
an opportunity for institutional
investors who own larger vacant
buildings to refurbish these and
bring upgraded space back to the
market. Examples it cites are
Redevco at the 8,357 sq.metres
(89,953 sq.ft.) George House,
George Square and Hermes’
slightly smaller property at
153-155 St Vincent Street.
Redevco’s David Smith said:
“With little or no development
activity currently under way,
particularly the prime central
core, we believe that we will be
bringing the new space to the
market at a time when there will
be limited competition.” |
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How to sell it
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| While the market may be tough
going, MEPC’s Hillington continues
to pull in the occupiers.
An example of this is that a
majority of the 2,044 sq.metres
(22,000 sq.ft.) that became
vacant in the summer was filled,
with McNicholas Construction
and Amici Procurement taking
space.
McNicholas will shortly be
moving into another property
on the estate. The company’s
Ken Reavey said: “The estate’s
infrastructure and facilities and
its proximity to Glasgow Airport
make it an ideal location to
ensure quick access to our
customer areas.”
Grant Edmondson of MEPC
said: “The key for MEPC is to be
able to offer competitive lease
packages to attract businesses to
Hillington and, more importantly,
to retain them.” |
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Grab the chance
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| Now is the time for the brave
developer to consider providing
new schemes and take the view
that the market will improve.
That appears to apply to J. Smart
who have started construction
on a speculative office, CityWest,
of 2,323 sq.m. in Edinburgh
which is part of a mixed use
scheme that includes 88 residential
units being built on the
site of the former Bank of
Scotland Computer Centre,
Robertson Avenue.
Ryden and James
Barr are marketing the offices,
which can be leased or sold.
Hamish Sutherland of Ryden said:
“There is a lack of speculative
development which, combined
with take up of new build stock,
suggests that the market will be
close to an under supply from
late 2012 onwards.” According
to Jones Lang LaSalle, take up in
Edinburgh in the first nine
months of the year was down
12% on the same period of
2010 at 45,707 sq.m. Ben Reed
of JLL said: “Due to the steady
decline in Grade A city centre
office space, a number of larger
companies with lease expiries or
breaks from 2013 onwards are
actively starting to review their
options which in time may
lead to some pre letting
activity.” |
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In brief #1
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| Jones Lang LaSalle and DTZ are
marketing the 7,877 sq.metres
(84,789 sq.ft.) 3 Lochside
Avenue, Edinburgh Park, the
largest single office building
outside the city centre. DTZ’s
James Thomson said: “As a
building constructed to a
specification above that of
standard speculative space, and
fitted out to a very high
standard, the property offers
exceptional value for money.” |
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Priority for the Clyde
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| To the credit of Glasgow, the effort
to regenerate the Clyde riverfront
into a viable and versatile area
remains a top priority.
This was on show as Glasgow
hosted the Waterfront Expo
Scotland 2011 in early November,
an event which had followed the
announcement of two significant
investments.
The Scottish Government
continues to do its bit to help
development and has given the
go ahead for the £40 million
Clyde Fastlink rapid transit bus
service. This will link the city
centre to the SECC and Scottish
Hydro Arena on the north bank
and across the Clyde Arc to the
Southern General Hospital
Campus. The vital point is that it
will be completed by the time of
the 2014 Commonwealth Games.
The other major project is the
£100 million scheme for 23,225
sq.m. (250,000 sq.ft.) of offices,
together with shops and 25
luxury apartments by Marylebone
Broomielaw in the city’s financial
district. At the nearby Central
Quay, Goodman is working on a
master plan for a £145 million
development that could create
5,000 jobs on a 7 acre site.
The regeneration cast a spell
along the river with Zed
Developments and Gordon
Murray Architects securing
planning permission for a 9,290
sq.metres (100,000 sq.ft.) on a
site bounded by Glasgow Green
and the Rutherglen Bridge. The
prominent location means, say
the developers, that it can act as
a gateway building into the
northern half of Glasgow and the
Commonwealth Games Village
beyond.
Bill Drummond of Zed said:
“The location’s superb public
transport links and proximity to
the M74 motorway are likely
to be of particular interest to
occupiers looking for new
accommodation.” The scheme is
arranged around a series of
courtyards facing towards the river.
Steve Pritchard of Clyde
Gateway said: “All our work
is about making the Clyde
Gateway area more attractive to
investors and developers as our
vision for the next 20 years
cannot be realised without
substantial investments by the
private sector.”
Among the other major
projects for the Clyde is a £50
million plan for Queen’s Quay,
Clydebank featuring a mixed
use scheme with a superstore,
food store, hotel, homes, offices,
leisure and restaurants. This
historic shipbuilding site was
where John Brown built the
’Queen’ fleet of ocean going
liners. |
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M74 effect
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| The impact of the M74 motorway
extension is amply illustrated by
the plans for developments and
recent deals. One deal that was
off market was the sale for £3.9
million to the CBRE Investors of
the nine unit, 6,689 sq.m. St
Andrew’s Industrial Estate,
Pollockshaws Road. The main
occupier is Rexel UK, an electrical
appliance supplier, with 58% of
the total space. Ross Burns of
Jones Lang LaSalle said: “This is a
landmark deal as the estate is well
located for access to the city centre
and the motorway network.” |
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In Stirling too
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| Planning permission has been
granted for one of the largest
commercial schemes in
Scotland, for offices of 16,410
sq.metres (176,640 sq.ft.)
together with leisure at Pirnhall
near Bannockburn.
The site, which was previously
the location of a surface mine
between the M80 and M9
motorways will have six
pavilions of varying sizes with
one property for the leisure
facilities.
Stuart Winter of Jones Lang
LaSalle who acted as the
planning consultant said:
“Notwithstanding the current
tough market, the proposed
development could provide a
significant economic boost to
Stirling.” |
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In Brief #2
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| Richard Rae, Acting Managing
Director of City Property
Glasgow LLP, said: “City
Property Glasgow LLP is
somewhat unique in this
market. We are one of
Glasgow’s largest landlords and
also Glasgow City Council’s
agent for surplus land and
property sales which brings
us into contact with agents
and occupiers, developers
and all of the public sector
agencies on a regular basis,
providing us with an excellent
knowledge of most sectors
within our market.”
A planning application has
been submitted by James
Mortimer’s Gleneroll Ltd for a
15,000 sq.ft. retail and leisure
scheme, as well as a hotel and
a possible casino, in Springfield
Court, immediately behind
Glasgow’s Princess Square. |
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Fiddes
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| Fifteen years ago, before the two
question referendum, I suggested
that the prospect of devolution
should not deter or discourage
companies from investing in
Scotland and a Scottish Parliament
could be expected to actively
encourage investment and foster
an environment favourable to
business. I concluded that the
Scots remained fundamentally
attached to the Union but sought
greater democratic expression
within it and that Holyrood would
be a stable and mature institution.
Although the success of the
SNP in this year’s election may
have brought that last statement
into question I would maintain
that the majority of Scots do not
favour the independence of the
fundamentalists. But the National
Party has already proved itself to
be business friendly, and indeed
since 1999 their MSPs have
consistently shown themselves to
be among the most business aware
at Holyrood and the willingness of
many Scottish business leaders in
cooperating with the government
confirms this. The current focus
on renewable energy and
confirmation of longer term oil
and gas availability in the North
Sea obviously give impetus to the
nationalist cause.
From a property point of view,
despite eccentric proposals regarding
commercial business rates, proposals
to facilitate and speed up
development are welcome and
there does not appear to be any
less interest in Scottish property.
For example Land Securities and
Grosvenor Estates (that most
English of landlords) recently
confirmed that they are
enthusiastically looking for
opportunities north of the border.
It seems to me that whatever
constitutional or fiscal changes
are made in the next few years
Scotland will remain investment
welcoming and business friendly
- certainly as much as any other
part of the United Kingdom. |
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Boom goes on
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| Aberdeen continues to be the
strongest commercial property
market in the UK, and probably
in the whole of the UK, with
rising take up and declining
supply of prime space.
This is the effect of the oil
price staying above $100 a
barrel, spreading the confidence
that is lacking in so many parts
of the country. It also means a
healthy appetite for new
development.
One of the latest is the green
light for the £40 million Grade A
office scheme by Stewart Milne
Developments for a 6,745
sq.metres (72,600 sq.ft.) block
at Triple Kirks. The developer is
seeking a pre let through CBRE
and FG Burnett.
Another major scheme is the
8,497 sq.metres (91,460 sq.ft.)
Pinnacle at Shipraw. Always
prepared for speculative schemes,
Knight Property has started on
the Queen’s House, 13 Queen’s
Road with a 1,500 sq.metres
(16,140 sq.ft.) extension.
Knight’s Howard Crawshaw said:
“It has been widely reported that
there is only 1,858 sq.metres
(20,000 sq.ft.) of office space
available in Aberdeen as
opposed to unprecedented
demand for Grade A space.”
According to Ryden, take up in
the six months to September
was up 43% to 46,981 sq.metres
(505,720 sq.ft.). It said: “Within
the city centre and West End,
virtually all of the Grade A
accommodation previously
available has now been taken up.”
A major site due to come onto
the market is Aberdeen Football
Club’s 13.7 acre Pittodrie Stadium
which is to be marketed by CBRE.
The club is moving to a new
complex at Loirston Loch which
could be operating by 2013.
CBRE’s Derren McRae
commented: “Aberdeen continues
to benefit from a buoyant
economy, and we are witnessing
a strong level of demand across
all sectors of the property
market. Given the site’s prime
location we anticipate keen
developer interest.”
Such is the strength of the
market that it is not surprising
that this extends to investment.
For example, Miller Cromdale has
sold the 2,926 sq.metres (31,500
sq.ft.) Freedom House which is
let to Aker Solutions for £6.75
million to CBRE Investors. |
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Spreading the joy
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| The buoyancy of Aberdeen has
spread more widely in the area
with plans for a new town of
9,000 residential units and
commercial facilities planned for
Chapelton of Elsick. A planning
application for Scotland’s largest
sustainable new town for around
half the total units in the first
phase has been submitted to
Aberdeenshire Council from the
Elsick Development Company
which represents the Duke of Fife
and neighbouring landowners.
The plans come from the
consultants WYG, whose Jason
Horner said: “Chapelton will be
an innovative sustainable
community and will include
substantial investment in new
infrastructure which will support
both the development and the
wider surrounding communities.”
The new town is 10 miles south
of Aberdeen. |
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Popular Townhouses
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| One sector of the Edinburgh
market that has turned in a
steady performance this year
is townhouses. Ryden, for
example, has completed five
transactions totalling £6.4 million
in a six month period with the
latest being the sale of two
adjacent properties of 1,741
sq.metres (18,744 sq.ft.) at
31-32 Moray Place for over £3
million to a private buyer for his
personal pension fund. Eight
offers were received for the
properties. Ryden’s Charles Guest
said: “We have received a good
level of enquiries for townhouses
for both conversion to residential
use and also owner occupiers for
continued use as offices.” Another
townhouse deal, this time through
Jones Lang LaSalle, saw Core
Asset Consulting, a recruitment
firm, acquiring the freehold
interest of its current office in the
441 sq.metres (4,747 sq.ft.)
property at 37 Melville Street. |
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In Brief #3
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| The human resources and
investment service group
Mercer has leased 958 sq.metres
(10,311 sq.ft.) in Quartermile
One, which is located at the
entrance to Quartermile on
Lauriston Place. Mercer’s Steven
Black said: “The move
demonstrates our continued
commitment to growth and
investment in Scotland.” |
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