Ever since the Brexit starting gun was fired back in June 2016 there has been much speculation surrounding the impact that exiting the European Union will have on business in Scotland. We have explored the impact on various sectors of Scotland's commercial property market, considering the risks the industry faces and where the opportunities may lie, following our review of recent industry reports and market intel.
Business as usual?
In the immediate aftermath of the 2016 vote the Financial Times reported there was an 'sinking' in the number of commercial property deals across the UK with London and Scotland hardest hit as properties were withdrawn from the market and deals aborted. Despite this initial market slump, with two months to go until 'Brexit Day', market analysis suggests that Scotland's commercial property market was unexpectedly steady over 2017 and 2018 with deal volumes maintained and increased investment. Indeed, the volume of demand for investment property across the market reached a four-year high in 2018.
It is, however, clear to see that some sectors are performing better than others and we now look at these in turn.
Quality office space
The office space sector is an area that has held up well so far. Historically, demand for Grade A office space has been high in Scotland and industry reports suggest that this demand still exists, particularly in Edinburgh and Glasgow who have produced Grade A office space developments such as the Mint Building in Edinburgh and Buchannan Wharf in Glasgow.
Although demand for Grade A space suitable for investment is high there are concerns that interest - and values - may drop following Brexit.
There has been suggestions that previously overlooked Grade B commercial property might become more attractive post Brexit, while investors and developers take stock of the economic climate and look for cheaper alternatives to high end Grade A property throughout Scotland.
This trend may prove particularly prevalent away from Edinburgh and Glasgow where there is already a lower demand of Grade A commercial property - though Edinburgh and Glasgow may also see this trend given that there has been a relative shortfall of provision over recent years in the two cities. If purchasers see less risk in Grade B quality stock, the knock on effect may well be improvements in the quality of that stock if they are prepared to make some investment. That may provide opportunities for owners and landlords of...