What’s in store for the Scottish property market in 2018?

Cushman & Wakefield gives its predictions on what lies ahead for the Scottish property market this year:

David Davidson, Chair of Scotland at Cushman & Wakefield comments: The Scottish property market has undoubtedly enjoyed a resurgence following the UK election result in June. The prospect of a second Scottish Independence Referendum, announced by Nicola Sturgeon on the first day of MIPIM in March 2017, was dealt a significant (and some say, terminal) blow. The SNP, which won 56 of the 59 Scottish seats at the previous general election in 2015, lost 21 seats.

Investors reacted positively. International players led the way. Events in Scotland have been overshadowed by Korea, Catalonia, and the dreaded Brexit and many have judged Scotland to be a lower risk investment location – on a relative basis.

We have had over £1 billion of transactions in the second half of the year so far. The question now is whether this bounce back was an over-reaction, or the start of a longer term journey for Scotland to regain parity with its competing investment locations south of Hadrian’s Wall.

Always the optimist, here are my predictions for 2018:

Activity Levels Up – investment volumes will increase with a full year of uninterrupted trading to at least £2.5 billion. The last three years at circa £2 billion have been impacted by elections or referendums. We are tracking over £800 million of deals which are under offer and many will not conclude before the year end, so there will be a bumper start to 2018.

Pricing Up – Yields Down – the yield gap with competing product south of the border will reduce. It may even close if investors reach the decision that the Scottish Independence question is dead.

Aberdeen on the up – whilst the occupational markets have some way to go, investors are returning to the city encouraged by the doubling of the oil price from its low point of $27 per barrel to current levels of over $60 per barrel. Whilst few are predicting another energy driven boom, an increasing number see the potential upside. We are buyers at today’s pricing.

New Speculative Office Developments – there are three speculative office buildings on site in Edinburgh (2 Semple Street, The Mint in St Andrew’s Square and Capital Square) but none in Glasgow. Watch out for a minimum of two new speculative office development starts in Glasgow and further pre-let driven development starts in both cities.

UK Institutions back in the market – congratulations to Hermes Investment Management for their entrepreneurial purchase of Sky Park in the up and coming Finnieston area in Glasgow. Other UK institutions are going to wake up to the fact that there is considerable value in Scotland and growth potential for the right properties. 2018 will be a turning point where UK institutions will buy more in Scotland than they sell.