Overall occupier demand rose at the sharpest rate in three years, with a net balance of 21% of respondents in Scotland reporting an increase, up from 10% seen in the last quarter of 2024. 

Looking at the subsectors, occupier demand was reported to have risen across office and industrial and retail space. A net balance of 14% of respondents reported an increase in occupier demand for office space, a net balance of 37% reported an increase regarding industrial space, and a net balance of 12% of respondents reported a rise in occupier demand for retail space, the second consecutive quarter this balance has been in positive territory.

Unsurprisingly, given the demand picture, surveyors in Scotland anticipate commercial property rents to rise during the next quarter of the year, as a net balance of 32% anticipate rents to increase, the highest this net balance has been in over 10 years. Looking at the subsectors, a net balance of 29% of respondents expect a rise in rents for office space, 56% for industrial space and 12% for retail space, which is the first time since 2015 this balance has been in positive territory. In the longer term, expectations are also strong, with a net balance of 42% of respondents in Scotland expecting a rise in rents over the next 12 months.

Looking at investor demand, a net balance of 18% of surveyors in Scotland reported a rise in enquiries overall, with net balances of 25% and 29% for office and industrial, respectively. Investor demand for retail space was said to have fallen flat.

Capital values are expected to rise over the next three months as a net balance of 11% anticipate an increase at all sector level. A net balance of 36% of respondents expect a rise in industrial sector capital values over the next quarter, up from 22% in Q4 2024. Capital values for office space are also expected to increase, albeit marginally so (a net balance of 4%). Regarding retail space, surveyors expect that capital values will fall as a net balance of -8% of respondents anticipate a decline.

Surveyors are more optimistic on the 12-month outlook for capital values as a net balance of 35% expect an increase overall. Capital values for both office and industrial space are expected to rise (both subsectors seeing net balances of 53%) however, rental space is expected to fall broadly flat.

Colette Brough of Whitelaw Baikie Figes in Glasgow commented: “There are signs of slight recovery in the market but this may change with current world events”.

Susan Pegg of Drum Property Group Ltd in Edinburgh, added: “There is constrained supply of new prime stock. Inflationary pressures on build costs, rent caps and the cost of finance are a barrier to office and build to rent development in Scotland.”

Commenting on the UK picture, RICS chief economist, Simon Rubinsohn, said: “Despite the turbulence engulfing the geo-political environment following President Trump’s tariff announcement at the start of April, feedback to the latest RICS was steady with the headline investment enquiries metric returning to positive territory, albeit modestly, for the first time since the second quarter of 2022.

“Longer term indicators, while generally constructive, continue to reflect the likely headwinds facing the real estate market over the next twelve months. Aside from the challenges linked to the global economy, concerns around domestic issues including the impact of the uplift in NI contributions are seen as likely weighing on occupier demand.

“Meanwhile, the bifurcation in the office sector remains very visible in the latest results with the outlook for prime space seemingly improving as sentiment around secondary offices remains deeply negative.”