A net balance of -50% of Scottish respondents reported a decline in overall occupier demand; and whist this figure is negative it is less downbeat than Q2.

Occupier demand for office and retail property was though reported to have fallen sharply (net balances of -63% and -84% respectively), whilst demand for industrial space was seen to be flat.

Unsurprisingly, availability of space increased in both the office and retail sectors and was broadly flat for industrial. A net balance of 66% of respondents said they had seen an increase in availability of standard shops, shopping centres and department stores. In terms of the industrial sector, availability remains tight having now fallen in Scotland for 10 of the last 12 months.

With availability of office and retail space increasing, surveyors are reporting a corresponding fall in expectations for rents in these sectors. A net balance of -51% was reported for 3month office rent expectations and -77% for retail. Expectations for industrial rents though improved with a net balance of +6% of respondents in Scotland expecting rents to be higher in 3 months’ time.

In a similar pattern, Scottish surveyors expect the capital values of office and retail property to fall over the next quarter but expect industrial property capital values to hold firm. A net balance of -87% was recorded for capital value expectations in the retail sector and -63% regarding office.

Michael Smart of Crucible Developments in Glasgow, said: “COVID-19 has accelerated general market trends including high street issues and logistics sector’s importance. However, if and when we get to a post-Covid environment it will be interesting to see how markets react then. As always in a changing market there will be losers and winners.”

Giles Edgar of 1910 Investments Limited in Edinburgh, added: “Market liquidity and risk continue to dominate investment decisions in all but prime industrial property. Many sectors have low activity levels due to the uncertain Covid outlook for Q4 2020 and Q1 2021.”

Tarrant Parsons, RICS economist, commented: “Sentiment across the commercial property market continues to be weighed down by the challenging economic backdrop. In particular, the physical retail sector, which was already struggling prior to the latest crisis, is being hit hard by the accelerated switch into online shopping and a drop in footfall associated with social distancing.

“Likewise, occupier demand across the office sector remains in decline and may continue to come under pressure going forward as businesses reassess their office space requirements following the increased prevalence of remote working.

“That said, some portions of the market appear to be well placed to expand in the face of these structural changes sweeping the economy. Indeed, the latest results point to a solid rebound within the industrial sector, with increased capacity in this segment needed to meet the sharp rise in online spending. As such, the twelve-month outlook for prime industrial rents and capital values has already returned to positive territory according to the Q3 survey feedback.”