Scottish property developments ‘to be delayed’ due to wary investors



Important property developments in Edinburgh and Glasgow are to be delayed by at least six months as investors are becoming increasingly wary of funding new opportunities amid the coronavirus pandemic, according to a report. 

Lismore Real Estate Advisors said in its Scottish investment market review that the coronavirus crisis has continued to impact the country’s commercial property market. The review found that after an encouraging first quarter of the year, at the half-year stage Scottish transaction volumes dropped by around 70% against the five-year average over the same period.

The review also found that most investors were concerned about income protection and rent collection while taking a ‘wait and see’ approach to new opportunities and developments.

Lismore Real Estate Advisors said that key development projects in both of Scotland’s largest cities were set to be delayed by “at least six months”, The Scotsman reports.

The firm’s research of a “wide range of leading investors” has highlighted that nearly 50%  expect to purchase offices over the next 12 months, with 39% selling and the remainder staying neutral. More than half predict that rents will remain static, with just 5% anticipating any growth.

The report also indicated that overseas investors will continue to dominate the Scottish market, specifically from Asia, the Gulf nations and mainland Europe, particularly Germany. One of the key deals concluded during the last quarter reinforces this, with Kanam Grund Group acquiring 4 North St Andrew Square from Knight Property Group for £31 million.

Lismore added that the build-to-rent sector, senior living, care homes and student accommodation are likely to be the most popular sectors for development and investment for the rest of this year and into next.

Chris Macfarlane, director of Lismore, said: “There are currently £300m in a small number of large transactions currently under offer in Glasgow and Edinburgh, but it remains to be seen whether these proceed or are renegotiated. Despite the uncertainty, Edinburgh will continue to succeed and remain attractive to UK and overseas investors, although the supply pipeline remains seriously constrained.”

The firm’s “Intelligence” report found that the five-year take-up in Edinburgh is 870,000 square feet, with the first half of 2020 amounting to 150,000 sq ft. Vacancy rates in the city are only 2.8% with newbuild Grade A space even lower at 0.13%.

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