Demand for commercial property in Scotland increases as availability stalls - RICS

The office sector was particularly strong, with a net balance of 50 per cent more respondents reporting growth in demand, while the retail and industrial sectors also showed an increase, recording a net balance of 15 per cent and 13 per cent respectively.

Demand for commercial space continued to outstrip availability, a pattern which has been evident in Scotland since December 2012. In the face of this imbalance, rent expectations for the next quarter are strongly positive across all sectors with 20 per cent more chartered surveyors projecting a rise in rents across all sectors.

Industrial space was again the strongest performer with 40 per cent more surveyors envisaging a further rise (rather than fall) in rents.

Sarah Speirs, Director RICS in Scotland, said: “At present the real estate sector seems largely insulated from the turmoil affecting financial markets. Indeed, the prospect of a ‘low for longer’ interest rate environment provides further comfort for those parts of the property market where values are looking a little stretched and arguably more vulnerable to a material shift in monetary policy. We continue to see supply restrictions and demand increase across all sectors leading to further increases in rent of commercial properties.”

Looking at the investment market, buyer enquiries increased in the office sector, remained unchanged for industrials, and dipped marginally in the retail area of the market. Significantly, latest figures show an upward trend in foreign buyer interest in the Scottish market, with a net balance of 9 per cent more respondents reporting an increase in foreign investment enquiries. Across the UK, capital values are forecast to rise further in all sectors of the market in both the near and longer term; with prime office and industrial sectors most likely to outperform.

Alan Gilkison MRICS, Ryden Glasgow, said: “Very little development is pushing rental growth as increased demand has fewer options to consider. A substantial jump in rental levels is expected once pre-lets are agreed, which will be at a new level for the market.”

Across the UK price expectations are positive, with the strongest performers expected to be London and the South East – however, 81 per cent of respondents in the capital now view commercial real estate in central London to be overpriced (slightly up on the 77 per cent who took this view in Q3).