Fears for city centre property in future of ‘concerns and challenges’ for the market
THERE may not be another major commercial property built in Glasgow until 2019 as a result of the uncertainty following the Brexit vote.
Jones Lang LaSalle has reported that Glasgow’s commercial property market enjoyed a 72 per cent increase in take-up in the second quarter of 2016 when compared with 2015, but the future holds “concerns and challenges.”
JLL director Alistair Reid said the Brexit vote was likely to lead to lower take-up, but said the strength of the first half of the year would carry 2016 through, ahead of the five-year average.
“I’m not confident in future development, and sites with planning consent for the next cycle of Grade A builds. We might not see a new building in Glasgow until late 2018 or early 2019,” he said.
Glasgow is facing a shortage of Grade A office space as a number of construction projects come to an end – with construction on the next cycle not yet under way.
“I am not confident anything will be built on spec,” said Mr Reid. “It will be pre-let, like Morgan Stanley.”
In the first quarter of 2016, Morgan Stanley took a pre-letting of around 155,000 sq ft at 122 Waterloo Street, which added to a strong quarterly performance. As a result of the Morgan Stanley deal, the second quarter dropped 42 per cent quarter-on-quarter.
But the second quarter was up 72 per cent on 2015, with take-up at 166,914 sq ft in the three months to June 30. Across Greater Glasgow and the west of Scotland it was 434,789 sq ft.
JLL called the performance of the Glasgow market “stellar” in the run up to, and immediately after, the vote, noting there were 58 deals completed in the quarter, with 30 for city centre properties. Highprofile builds, such as 110 Queen Street, are now full.
Mr Reid said: “The Glasgow office market remains robust. It has had an excellent first half year.”
The commercial property market has been among the hardest hit since the Brexit vote. Published yesterday, a survey carried out by the Royal Institute of Chartered Surveyors (RICS) indicated that the overall UK market may be entering a downturn.
The report said that there had been a significant dip in both confidence and demand in the Scottish commercial property market since the June 23 vote.
Jeff Matsu, RICS senior economist, noted that the political and economic uncertainty in the aftermath of the referendum result had “clearly dampened” sentiment in the commercial property market, with the tone becoming visibly more cautious right across the UK.
Mr Reid said: “There’s not been a significant change in live transactions but we don’t know what the underlying sentiment is.”
JLL was involved in the largest city centre deal in the three month period, which saw AXA take 49,424 sq ft at the Cuprum building on Argyle Street. The next largest deal of the quarter saw Regus take 29,020 sq ft at Tay House on Bath Street.
Outside the city centre, JLL was involved in a deal which saw Glasgow School of Art secure 117,500 sq ft of space at Kelvin College in Cowcaddens.
The City Centre headline rent was approximately £30 per sq ft and JLL expects this to remain stable throughout 2016.