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Sharp fall in Scottish commercial property market

An analysis of commercial property sales during the first quarter of 2019 from the Scottish Property Federation (SPF) claims that total the value of sales in Scotland fell by 21 per cent compared to the same period in 2018. The drop in value was largely driven by fewer high-value transactions for this period, with the number of £5m+ sales down by nearly one-third compared to Q1 2018.

The SPF analysis shows a 21 per cent (£203m) year-on-year decrease in sales by value in Q1 2019, with the value of commercial property sales in the quarter totalling £763m. The SPF also reported £3.03bn in property sales across Scotland for the last four quarters, the lowest rolling annual total since Q2 2014.

Property data experts at CoStar reported a similar decrease in investment in Scotland in Q1 2019. Investment volumes fell compared to Q4 2018 and Q1 2018 by 41 per cent and 54 per cent, respectively. CoStar points to investment into alternative assets as the key driver of activity in Q1 2019, with below average investment into Scotland’s industrial and office sectors.

Edinburgh bucks the trend

Edinburgh showed a break from the national trend in Q1 2019, with higher values than the same quarter in 2018. The Capital recorded a total value of £264m in commercial property sales, accounting for 35 per cent of the total value of commercial property sales in Scotland.

Aberdeen also saw commercial property sales recover against the previous quarter, with an increase from £14m to £41m. However, year-on-year, the total value of Aberdeen’s sales fell sharply by £125m.

Glasgow experienced a decrease in the total value of sales by £26m (15 per cent) from the previous quarter but rose by £49m on Q1 2018. Nineteen per cent of the total value of Scotland’s commercial property sales in Q1 2019 occurred in Glasgow, totalling £171m.

David Melhuish, Director of the SPF, commented: “The sales report for Q1 2019 shows a clear fall in total value of commercial property sales compared to the previous year. This aligns with investment data suggesting a subdued start to 2019 for the Scottish commercial property sector.

“However, the sales data does underline the current strength of Edinburgh’s commercial property market, with the Capital accounting for 35 per cent of the Scottish market by value. The investment data also highlights the rise in investor appetite for alternative property asset classes, such as hotels and build-to-rent. For investors, Edinburgh remains a hotspot, while more broadly, low growth and lack of certainty in the economy is weighing down on activity.”

By Neil Franklin

Source: Workplace Insight

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North’s commercial property market reports healthy start to 2019 and further positivity ahead

THE north’s commercial property sector enjoyed a positive start to 2019, according to the latest market research.

The new report from Lambert Smith Hampton, which covers the first three months of the year, shows the total investment volume of £42.5 million was almost three times higher than the same period a year ago (£17m). However, that figure is 47 per cent below the five-year quarterly average.

The latest Investment Transactions Northern Ireland Bulletin is a continuation of consistent investment witnessed over the last year, but the total of five transactions last quarter is the lowest in five years.

The deals struck in the first three months of year were largely dominated by the office sector, with the largest transaction at the start of 2019 a local government department’s £16m purchase of James House at the Gasworks in Belfast.

Other notable transactions included the £9.6m sale of Donegall House to a private investor group, as well as retail operator Henderson Group’s £7.6m acquisition of a portfolio of petrol filling stations, which they already occupied as tenant

While there were a flurry of large retail transactions at the end of the year, retail was notably absent at the beginning of 2019.

Looking ahead a significant pickup is forecast in the second quarter of the year, with 21 deals either completed or agreed, totalling approximately £75m.

Lambert Smith Hampton director of capital markets, Martin McCloy said the local market continues to be impeded by ongoing political uncertainty.

“It is generally accepted that the six-month extension to the EU/UK withdrawal date and preventing the UK crashing out of the EU in a ‘no-deal’ scenario was the best outcome at the end of the March for the UK and Northern Ireland. However, there is no doubt that the continuation of this period of uncertainty will continue to frustrate the investment market,” he said.

Since the EU referendum in 2016 there has been a steady decline in investment activity in Northern Ireland, with the quarterly average

of the ten quarters pre-referendum (£101m) more than a third less more than the average during the same period post-referendum (£63m)

Coupled with the lack of a Northern Ireland Executive it has led to a ‘wait-and-see’ attitude, which has created a lack of supply to the market. That being said good quality assets remain in demand, according to Mr McCloy.

“Properties with solid fundamentals will remain attractive to investors. A recent report by MSCI reported that Belfast was among the top performing UK office investment markets in 2018. Coupled with the strong office occupier market, we expect that in 2019 office investment will become the predominant asset class in Northern Ireland, over taking retail,” he added.

By Gareth McKeown

Source: Irish News

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Industrial demand to the fore in commercial property sector

Demand for industrial space is dominating the East of England commercial property sector as interest in retail continues to falter, according to new research.

The Q1 2019 RICS UK Commercial Property Market Survey also reported anecdotal evidence suggesting a lack of movement on Brexit continues to deter investors and occupiers across the board.

Across the sector, demand for the East of England’s commercial property dropped in the first quarter of 2019, being mainly driven by the lack of interest in retail units.

Some 37 per cent more respondents reported a fall in the first quarter of 2019. The rise in online shopping continued to sustain the industrial sector where respondents continued to experience a steady rise in tenant demand.

Demand for the East of the England’s industrial units continued to outpace supply, the report also found. This quarter, respondents reported a fall in the number of available units for sale, resulting in more respondents expecting rents to rise in the coming three months.

The latest survey data also supports recent reports on the number of empty shops on the region’s high streets, as the number of vacant retail units have been increasing over the past 15 months.

Alan Matthews, of Barker Storey Matthews in Huntington, said: “There is no doubt that the uncertainty of Brexit is being felt across the board. I believe the outlook for our region in the medium to longer term is positive but expect to see considerable volatility over the next 12 months and possibly longer.”

RICS economist Tarrant Parsons added: “Trends across the UK commercial property market in the early part of 2019 have continued in a similar vein to those reported last year.

“The industrial sector remains a clear area of strength while the retail sector continues to be challenged by the growth in e-commerce.

“Brexit uncertainty is again cited to be a negative influence on market activity, causing some occupiers and investors to hesitate as they await further clarity on the future direction of policy.”

Source: Insider Media

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Commercial property: High street challenges need addressed

The currently volatile environment for UK retailers presents a significant challenge to the commercial property sector. Along with the estimated 85,000 jobs lost in UK retailing in 2018 is the worrying rise in empty commercial units.

Figures published in the Scottish Retail Consortium-Springboard Footfall and Vacancies Monitor show hat one in eight high street shop premises lay vacant last month, with a 12 per cent town centre vacancy rate in Scotland, up the 11.1 per cent recorded last October.

Steps are being taken across the nation to repurpose some of these vacant premises for residential, hotel, leisure or community use.

However, UK retailers must also continue to repurpose their businesses to ensure they are relevant to the changing nature of consumer demands.

Many of those which managed to avoid insolvency last year are now embarking on store closure plans and rationalising their portfolios. The trend of traditional retailers extending their online offering also continues, with some smaller stores diversifying by installing convenient customer options such as Amazon lockers and becoming click-and-collect points for larger retailers.

Technological advances, including the use of mobile payment, scan and payment checkout apps, are also making the sector more efficient, while further progress in areas such as VR and AI offers an additional strand of support.

In spite of these positive developments, there is no doubt that many of the larger retailers will continue to struggle with the size and cost of their property portfolios. Debenhams is continuing discussions with its lenders and is not ruling out a company voluntary arrangement, while the new management at Marks and Spencer is promising dramatic changes in range, style and customer focus.

Meanwhile, other big high street names seek to negotiate reduced rents with their landlords to keep themselves trading. The changing nature of the marketplace requires retailers to make bold decisions to entice consumers and leverage value from their physical premises.

Apple and Selfridges are both successfully doing this by making shopping at their outlets an experience. Selfridges credits its successful Christmas trading period to the staging of festive events which drove people into its stores, and Apple delivers added value for customers in its premises by holding free events.

The progression of some online retailers moving to a bricks and mortar model could also make a positive impact on the commercial property sector. Amazon Go is reportedly looking at expanding its app-based convenience store brand into London with the potential of Amazon Books stores opening in the UK.

Physical premises supported by a strong online presence point to the future direction of travel in retailing. While we expect more casualties in the year ahead, the changes that are currently being implemented provides some comfort to commercial property landlords as retailing continues its challenging evolution.

The UK retail market is one of the most dynamic in the world and is the biggest employer in Britain; it is also one of the most adaptive to change. But landlords and tenants must act quickly to stem the tide of store closures and declining footfalls.

Source: Scotsman

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Struggling retail sector dragging down north’s commercial property sector

A WEAK retail sector is dragging down an otherwise strong commercial property market in the north, according to a new report.

The latest RICS and Ulster Bank Commercial Market Survey, covering the last three months of 2018, shows

a decline in demand for retail space, largely driven by changing shopping habits.

The figures further reveal that enquiries for retail property have fallen for the fourth consecutive quarter.

The outlook for the industry is no brighter, with an expectation retail rents will continue to fall over the next three months.

The retail performance is in direct contrast to the overall picture, with the north one of only a small number of UK regions to report an increase in occupier demand (10 per cent of respondents)

Investment enquiries are also reported to have picked up for the first time in nine months.

The encouraging figures were boosted by the industrial and office sectors,which both reported an increase in demand, the former from a net balance of 26 per cent of respondents and the latter, 48 per cent.

The rental outlook is also positive for the next three months, particularly within the office sector, while

enquiries regarding office and industrial assets are on the increase.

RICS Northern Ireland chairman, Brian Henning said the retail figures mar an otherwise positive market performance.

“Changes in the preferences and behaviours of consumers are resulting in a continually challenging landscape for the retail sector,” Mr Henning said.

“On the other hand, sentiment amongst surveyors remains relatively positive in the industrial and office sectors, which is encouraging in the face of uncertainty. Retail aside, expectations for the market are also relatively upbeat considering the landscape.”

Gary Barr, relationship director for commercial real estate at Ulster Bank added:

“The downturn in high street retail has been most keenly felt in our secondary centres. Investor demand for office and industrial has remained robust and prime assets in Belfast city centre are most in demand.”

Source: Irish News

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‘Dark cloud above our heads in form of Brexit’ after spectacular year in commercial property

SCOTLAND’S commercial property sector rode a financial services wave after Barclays’ Glasgow acquisition but while the “mood music is very positive, ultimately there is a dark cloud above our heads in the form of Brexit”.

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Decline in new UK commercial property construction work within private sector

The results of the EU referendum have been detrimental to the commercial property sector with the number of constructions continually decreasing, according to an analysis of the figures by Savoy Stewart.

With figures from the Office of National Statistics (ONS) showing a monthly decline in the number of new UK commercial construction work undertaken by the private sector since December 2017, the property firm analysed the number of commercial properties available to let in 20 of the biggest cities in the UK.

As expected, the city with the highest number of commercial properties to let was England’s capital city London, which had 6,137 properties in November 2018 available for businesses to rent.  However, figures from estate advisory organisation Colliers claims that 90 percent of London office availability is constituted by second-hand product, while new/refurbished availability is down by over a third in the past year.

Scotland’s capital city Edinburgh had the second lowest number of commercial properties on the market to let (133). And although Edinburgh’s figures seem to be less intriguing than anticipated, it seems Scottish commercial real estate has experienced a bounce back, with a total return of 1.7 percent in the third quarter of 2018; a 1.4 percent rebound in the second quarter.

The figures, which were extracted from property website Zoopla for the month of November 2018 also showed that The cities with the highest number of commercial properties to let in November 2018 on Zoopla were: London (6,137), Derby (822), Birmingham (724), Manchester (501) and Leeds (481).

The cities with the lowest number of commercial properties to let in November 2018 were: Preston (153), Coventry (145), Belfast (145), Edinburgh (133) and Newport (128).

Source: Work & Place

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How is the UK commercial property sector performing?

The UK commercial property market is rapidly changing and facing highly uncertain times in the face of Brexit. We have a look at how the industry is evolving and what commercial property stocks to watch.

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Get ready for the commercial property data revolution

In these uncertain times, modern commercial real estate landlords and operators have turned to technology and data to weather the storm and gain a competitive advantage. Those that do so are arming their companies with an ability to quickly pivot operating models, reallocate investment to counter risk and capitalise on opportunity.

The right software lets you future-proof your business, enables you to understand performance in real-time and most importantly helps you predict what’s next – the biggest hotspots and opportunities, which team members are doing well, and who needs some support.

You don’t have to look far to see the transformative power of data and examples of how it is successfully being applied to drive digital transformation. Take the financial sector, where unleashing the power of data has not only streamlined workflows but also enabled firms to grow their businesses through powerful AI applications that personalise their services.

According to a 2017 Forrester report, there is an increasing gap between financial firms that embrace technology to fuel growth and business transformation and institutions that continue to do business in traditional ways.

The evolution of the stock market also highlights the value that technology and actionable data unlocks. Look at the New York Stock Exchange. Thirty years ago it was characterised by highly inefficient and manual processes and opaque information. Today? Technology has transformed the way the market operates and traders are able to leverage real-time data and algorithmic trading to execute deals in nanoseconds.

The commercial property sector is making great strides in using new software offerings such as leasing and asset management platforms to capture and analyse data. Landlords and brokers are using the resulting insights to make better decisions that move the needle. We’re fast approaching the next major frontier – market benchmarks.

Using real-time market data to make better decisions has been the standard in our own backyard for other property types such as multi-family and hospitality for some time. RealPage Yieldstar® helps PRS owners leverage market data to determine pricing in real-time and for hospitality the STR Global Report helps landlords benchmark a hotel’s occupancy or revenue that day.

Unlike PRS real estate or the hotel space, when it comes to office, industrial or retail properties, market leasing data on pricing, tenant demand or operating efficiency within buildings is neither transparent to the market nor recent.

We are working hard to develop the ultimate market benchmark. In June, we announced plans to launch VTS MarketView™ – the industry’s first real-time benchmarking and market analytics. For the first time, VTS customers will be able to compare their own property-level performance against market-wide data on our platform.

Aggregated and anonymised, this data and insight will be embedded in users’ daily leasing and asset management workflows and presented in context to drive better decisions, informed by key market-wide metrics such as net effective rents, concessions, leasing spreads and velocity, level of tour requests and deal conversion rates.

For the commercial property industry, the possibilities for how technology and data can be applied are endless. For example, AI could be applied to real-time market benchmarks to provide landlords with property-specific predictions and recommendations for maximising asset value.

These are exciting times, but not without risk. Now, more than ever, it’s time to embrace the data revolution or risk being left behind.

Source: Property Week

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Boom time for commercial property sectors in Glasgow and Edinburgh

Glasgow has just witnessed a record quarter for office deals, with city centre occupier take-up exceeding one million sq ft for the year to date, according to data from JLL.

Thanks in large part to Barclays, which re-defines the ‘city centre’ parameters to cross the river Clyde, total take-up across Glasgow’s city centre reached 614,466 sq ft between July and September, spread across 31 deals.

Glasgow’s record quarter for office transactions brings the city centre’s total take-up for the year to date to 1,192,689 sq ft, with three months of the year still remaining. By marked contrast, office occupier take-up for 2017 totalled 627,313 sq ft.

In the largest deal of the quarter, and the year so far, Barclays took a 470,000 sq ft pre-let at Buchanan Wharf. Other notable deals in the city include 60,000 sq ft take-up at 123 St Vincent Street, and Glasgow School of Art and CXP Limited both signing new deals for more than 10,000 sq ft of city centre space.

In the first six months of 2018, take-up of city centre office space amounted to 578,223 sq ft, which was already boosted by notable major pre-let activity to the HMRC at Atlantic Square, and Clydesdale Bank’s 110,955 sq ft pre-let at 177 Bothwell Street. JLL have been involved in four of the top five largest deals in 2018 to date, and almost a third of all transactions this quarter.

According to JLL, Glasgow’s office market is continuing to attract activity and proving itself to be a desirable location for business to operate.

Alistair Reid, director at JLL, said: “With total take-up already exceeding 1 million sq ft, we anticipate that 2018 will be the best year for office take-up in Glasgow in recorded history.

“From larger corporates and government departments to SMEs and fintech firms, requirements and new enquiries for city centre space remain strong. It’s inevitable that this demand will continue to impact supply, but with three new speculative developments in the offing, there is at least a pipeline of new build supply further down the line.”

Along the M8, JLL is reporting that Edinburgh’s commercial property market is maintaining its strong performance for office occupier take-up, transacting over 300,000 sq ft of office space during the last three months.

According to JLL, a strong third quarter ensured that Edinburgh has already broken the annual 10-year average, following a record-breaking 2017 in which 1,100,000 sq ft was transacted.

Total take-up in Edinburgh reached 301,713 sq ft between July and October, an increase of approximately 30% year-on-year, spread across 49 deals.

The largest occupier deals saw Royal London secure 47,000 sq ft at 22 Haymarket Yards, while Brodies pre-let 43,000 sq ft and Pinsent Masons pre-let 27,000 sq ft at Capital Square.

Despite the prospect of another bumper year for the capital’s office market, grade A availability and the pipeline of new office space remain a major problem.

Craig Watson, director at JLL said: “The rapid pre-letting of new stock coming onto the market, such as the Capital Square development, underlines the limited availability of prime Grade A stock in the city centre. There simply isn’t enough in the short-term.”

Source: The National