Referendum decision set to boost Scotland’s commercial property markets
The No vote in the Scottish referendum has lifted an uncertainty for commercial property markets for businesses on both sides of the border, according to real estate firms.
However, according to Walter Boettcher, director of research and forecasting with global commercial real estate services firm Colliers International, while the No vote might suggest that little has changed, in reality it may be the beginnings of a fundamental shift UK wide between local governments and central government.
He believes that the referendum has highlighted how a new balance of local and central powers and decision making must evolve to accommodate local aspirations and perceptions of economic opportunity. Regions must have the power to determine their own economic strategies and exploit what they see as their own competitive advantages.
‘Scotland will remain part of the United Kingdom, but it will be a Scotland that will join in unison with other UK regions who have also been seeking greater self-determination in regional policy making,’ he said.
‘From a narrow business perspective, economic and financial confidence has perhaps regained its balance and this will drive higher levels of activity as pent up demand and projects shelved temporarily will be dusted off and pushed through. Certainly property sector leasing and investment transactions both north and south of the border will see a decisive boost,’ he explained.
‘From a broader strategic business perspective, given international appetite for infrastructural development by sovereign wealth funds in a very low interest rate environment, the opportunity for commercial real estate investment and development is staggering and may sustain activity levels well beyond the normal limits of traditional property cycles,’ he added.
Overall the result should provide a welcome boost to Scotland’s property market, according to Alasdair Humphery, lead director for JLL in Scotland. ‘Uncertainty surrounding the possible outcome of the referendum has undoubtedly been a factor in the decision making process for many potential occupiers and investors, although some will continue to hold back commitments until there is a clear indication of what that result means for Scotland and wider United Kingdom,’ he said.
‘Following the result, I am optimistic we’ll see more confidence returning to the market and an increase in activity from international occupiers, some of whom had previously been reluctant to progress expansion plans,’ he added.
He pointed out that the constitutional and fiscal changes that will occur if Scotland is granted devo max are at this early stage an unknown quantity. ‘We will clearly be keeping a close eye on proposals for further devolution of powers, and what these might mean for our clients not only in Scotland but across the UK. However, the devil is in the detail, and much of this detail has yet to be worked out,’ he said.
‘We’ll be monitoring developments over the coming months to form a better sense of what the Scottish property market will look like for our clients and how we can best advise them to plan for the future,’ he added.
International property firm Knight Frank also see the result as providing a boost to Scotland’s commercial property sector, as it puts an end to two years of speculation about whether it will remain as part of the United Kingdom.
Indeed, financial markets reacted positively to the result, with the Pound reaching a two-year high against the Euro and a two week high against the US dollar, while the FTSE 100 index also advanced in early trading.
‘We believe the result will lead to a flurry of investment activity in the commercial property market over the coming months, as the uncertainty surrounding the vote lifts and investors regain the confidence which appeared to pause in the run-up to the referendum. Indeed, this was reflected in the August PMI surveys, which showed Scotland lagging behind the rest of the UK,’ said Darren Yates is head of global capital markets research at Knight Frank.
He believes that the occupational market will also receive an immediate morale boost from statements by Lloyds and Royal Bank of Scotland which confirm their intention to retain their corporate headquarters in Scotland. Both banks had announced contingency plans to relocate south in the event of a yes vote.
‘In the medium to longer term, the likelihood of Scotland gaining greater political power is likely to result in an enhanced role for its key cities as political, administrative and commercial centres. This should lead to increased demand for commercial property, while a boost to the public sector is also likely, as Scotland realigns its public services to accommodate new powers,’ explained Yates.
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