Drop in demand for commercial property since EU referendum

POLITICAL and economic uncertainty have caused a significant dip in confidence and demand in the Scottish commercial-property market since the vote to leave the European Union.

Following the temporary suspension of a number of commercial property funds in the days after the Brexit vote, a survey carried out by the Royal Institute of Chartered Surveyors in the 18 days after the vote has indicated that the overall UK market may be entering a downturn.

Commercial property funds were among those hardest hit in the days after the vote, with a number of funds suspending withdrawals.

The survey confirms that there has been a drop in investor demand across all industry sectors, while foreign-investor appetite in Scottish commercial property has also declined at a “significant” rate.

Jeff Matsu, Rics’ senior economist, said: “Political and economic uncertainty in the aftermath of the referendum has clearly dampened sentiment, with the tone becoming visibly more cautious right across the UK.

“Although the impact is widespread, the drop in confidence has been most pronounced in Scotland and London.”

Both rent and capital value expectations over the next 12 months are now in negative territory.

While opinions are mixed over the general health of the commercial-property market north of the Border, 36 per cent of respondents to the Rics survey across the UK said they felt the market is now in the early stages of a downturn.

During the second quarter of 2016, investment inquiries fell sharply across Scotland with a net balance of 40 per cent of respondents reporting a decline in inquiries.

Looking at a three-year horizon, Scotland and London — both of whom voted to remain in the EU — are the only areas of the UK that do not expect to see capital values return growth.

In Scotland, occupier demand dropped for the first time since the third quarter of 2014.

The survey also saw 31 per cent more respondents saying that they expected commercial rents in Scotland to decline over the coming quarter.