The momentum which lifted Scotland’s commercial property market throughout 2013 has continued gathering pace into the first quarter of this year, claims a new report.
Investment across all commercial sectors for the first quarter of the year was 2.8 per cent, down slightly on the 3.3 per cent of 2013’s final quarter, but delivering an annual return to the end of March of 10 per cent — well ahead of the 0.2 per cent for the same point last year.
“This level of performance is consistent with wider signs of economic and occupier recovery that has been observed in Scottish commercial property since spring in 2013,” says the report by property consultants CBRE.
Relative to the UK as a whole, however, Scottish property continues to underperform, although the gap is beginning to close, particularly within the retail and industrial markets. The report claims that retail performance north of the border is currently the closest to UK rates of return, with an annual total end of March return of 8.6 per cent, just 1.4 per cent below the national return.
Scottish industrial property was once again the strongest performing sector in the first quarter, delivering a quarterly total return of 3.9 per cent, although down from the previous quarter’s 4.7 per cent. Compared to both offices and retail, industrial benefited from 0.3 per cent of rental value growth during the quarter, which assisted in pushing capital values up by 2.2 per cent.
“Little has changed in the relative performance between Scottish cities, with Aberdeen’s offices and industrials continuing to show the greatest performance,” said Aileen Knox, a senior CBRE director.
“Retail returns from Edinburgh, Glasgow and Aberdeen haven’t been as strong, but there is now a little more variation between these cities that was not as evident last year,” she added. “Edinburgh retail in particular, with an annual total return to March of 9.3 per cent, is now beginning to catch up with other sectors in Scotland.”
Commenting on the office market, Knox said Aberdeen was the top performer with annual total returns to the end of March pushing ahead of the 20 per cent mark and holding its own against comparable south of England markets such as Cambridge. Industrials in Aberdeen, at 18.8 per cent, are not far behind. The granite city’s nearest rival was Edinburgh, with an annual total return of 14.7 per cent.
Bank Note: Scotland’s economy continued to grow in May, but at a slower pace than the previous month, the Bank of Scotland reports.
In its latest Purchasing Managers Index the bank suggests “solid” private sector expansion in May, though manufacturing exports dropped to their lowest level in five months. Output continued to rise in April, the survey of purchasing managers found, prompting businesses to expand to meet demand as backlogs fell for the first time this year.
The number of new jobs created across the country also continued to rise for the eighteenth, the bank said, although at the slowest growth rate in four months and well below the UK average.
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