News In Focus
27 August 2010
Scottish comm prop market weakens, consultants report
The Scottish commercial property market weakened in the second quarter of 2010, despite strong growth in the retail sector, according to the latest report from property consultancy CB Richard Ellis (Scotland).
Total returns fell to 2.8% with capital growth of 1.3%, a decrease on the 5.5% total returns recorded in Q1 2010. This was in line with the wider UK market, which saw total returns of 3.5% in Q2 compared to 6% in Q1.
Outperforming the other two sectors for the fourth consecutive quarter, retail property saw total returns of 2.8% in Q2 2010, with capital values growing by 1.3%. Office performance weakened the most significantly, with total returns of 2.2% and capital growth of just 1%. After stabilising in Q1, rental values in the office market fell by 0.8% in Q2, signalling weaknesses in occupier demand.
Scottish industrial property showed a greater resilience during Q2 after previously underperforming, with total returns of 2.6% and capital growth of 0.8%, while rental values fell by just 0.2%, compared with 0.7% in the first quarter.
The investment market saw an 8% pickup in activity, taking the total Q2 investment turnover to £350m – an underperformance compared to the overall UK market, which saw a 40% increase in investment activity in Q2, taking total turnover to £8.5bn for the quarter.
Aileen Knox, Director, CB Richard Ellis (Scotland), commented on the findings in the report: “Economic recovery appears to be happening at a slower pace in Scotland than the rest of the UK and this has affected the commercial property market as a whole. However, the Bank of Scotland PMI survey data points to an improvement in GDP growth for the second quarter of the year. This is important for Scotland as there was no growth in Q1 and it is likely to feel the effects of ongoing austerity measures introduced by the new Government due to the large number of public sector jobs.”
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