Following four years of transition, Scotland’s office sector is adjusting with a split into occupiers taking less but high quality space to accommodate a hybrid work pattern and those making their existing space work better for them with greater cost certainty. Lease re-gears and extensions have reached a peak, as occupiers look to avoid expensive fit out and exit dilapidations costs.
Headline prime office rents have increased again in Glasgow and Edinburgh and sustained in Aberdeen. Peripheral areas in Glasgow are beginning to see a strategic pivot towards alternative uses such as life sciences and residential, whilst former office buildings in Edinburgh are becoming hotels, creating a challenge to identify the next pipeline of city centre Grade A opportunities.
The industrial sector continues to demonstrate robust performance regarding take up, occupancy rates and rents. High construction costs and funding struggles have focused attention on refurbishing older stock. There’s a significant focus on ESG credentials, which also contributes to cost-push growth in rents. Vacancy rates in Central Scotland have hit the lowest point on record, indicating early signals of the next development and refurbishment cycle.
Despite challenges from online shopping, the retail property market is gradually finding stable ground. With sustained rents, and growth in prime Edinburgh and Glasgow the market hints at stability with renewed drive in redevelopment and diversification. Growth opportunities are emerging in convenience, discount, and food and beverage areas, although leading comparison goods brands are more focussed on prime locations and retail parks.
As interest rates stabilise, the property investment market in Scotland can start to look forward to a better year in 2024, especially in prime sectors such as PBSA, logistics, and high yielding industrial properties. Offices continue to reposition around new working norms meaning that timing the bottom of the market is challenging although investors are expected to return to secure attractive prices.
Dr Mark Robertson, Scottish Property Review 2024’s author comments:
“Our comprehensive research and outlook for 2024 offers a picture of a Scottish property market that, while undergoing transition, reveals a number of existing and emerging areas for growth.
“Forecast of gradual economic recovery in the next 2-3 years should reinforce a stable commercial property market with improved development and investment prospects.”