There are good times to be a self-employed Scottish property investment specialist. There are also bad times.
Andrew Kubski, sole director of Clarity Property Consultants, is not sure how to categorise November 2012. After three quarters in which barely any significant deals were agreed, buyers and sellers returned to the Scottish commercial property investment market in the autumn. From his second-floor office above Glasgow’s Blythswood Square, Kubski assesses a troubled year for investment surveyors.
“In times like these you become more of a general practise surveyor – you do whatever gives you a return. It is the same for the big investment teams in the national firms – they are all running around frantically,” he says.
Fortunately for Kubski, the flow of small deals has been slightly better than the flow of large deals the big agencies depend on. He explains: “Deals up to £2m keep us going, but the big firms can’t survive on deals of that level.”
Market chatter suggests some of the big firms have struggled. Days and weeks are said to have been spent schmoozing potential clients in London in an effort to generate the work their Scottish investment teams need.
A busy autumn has put a stop to the hectic routine of frequent London-Glasgow shuttle trips – CBRE research shows investment volumes doubled in Q3. According to Montagu Evans’ Douglas Wood, his firm was never a frequent flier. “Yes, we’ve spent more time down there, but that means one day every two months. That has been the way in the property market for some time,” he says.
Wood blames the evaporation of Scotland’s native investment players – RBS, Bank of Scotland, Kenmore, Kilmartin – for the more London-focused investment scene.
Today, Middle Eastern and South African investors are said to be pounding the streets, while Tritax, funder of the 1m sq ft Amazon depot at Dunfermline; IO Group, which is thought to be looking but hasn’t yet bought; and Pears Group, which has acquired Wellheads Industrial Estate in Aberdeen, are among the increasingly long list of active players.
There are also plenty more big autumn transactions to catch the eye and lift the heart. Risk-averse UK funds have thrown their hats in the ring for Edinburgh’s 205,000 sq ft multi-let Waverleygate office scheme where vendor Highcross is looking for around £50m. A short walk away, the 250,000 sq ft Calton Square office scheme is under offer to a German fund for £57m, while in Glasgow, 100 Bothwell Street is on the market for £19.8m, a yield of 9.3%.
Buyers are also circling Pramerica’s 192,000 sq ft BP offices in Aberdeen. The property comes with a £52.7m price tag, a yield of 6.75%.
Wood says that investors are looking for successful, largely risk-free micro-locations. “Glasgow retail, for instance, is still pretty attractive,” he says, pointing to a series of disposals on Sauchiehall Street that are attracting strong institutional interest at a yield of 7.49%.
Stuart Agnew – who left his own business Agnew Property Consultants to join GVA – says: “There’s real activity as the anti-regional sentiment in the property investment scene begins to change.”
Agnew estimates that funds have allocated more than £1bn to Scottish purchases and many European buyers are spending. German buyers are particularly busy, with Union Investment buying the G1 office building on George Square in Glasgow for £60m, a yield of 6.25%.
With more lenders prepared to risk distressed sales – and UK funds returning to the market to buy – Agnew is hopeful there will be enough business to keep Scotland’s investment surveyors occupied.
Chances are there will be no more redundancies or departures among Scotland’s investment surveyors. “Cut any deeper and it will be difficult for the big firms to recover when the market does, eventually, recover,” says one insider.
Chill winds are blowing leaves across handsome Blythswood Square, but for Kubski, and many others in the Scottish property investment scene, the mood is more spring-like than autumnal. They sense that Scotland is back on investors’ buy lists – and expect winter investment sales to attract big name buyers.
Kubski says: “The first half of the year was historically low in deals. I guess the message for all investment specialists is to try to make the best of the autumn.”
The big vote
European property investors have overcome their doubts about the 2014 Scottish independence referendum – but London buyers are not so sure.
So say investment specialists in the aftermath of last month’s deal between UK prime minister David Cameron and Scottish first minister Alex Salmond.
The Edinburgh Agreement cleared away the last uncertainties about Scotland’s independence vote. A referendum will now to place in autumn 2014.
Scottish Widows Investment Partnership is among Scotland’s big buyers – around 12% of its £1.7bn property portfolio is invested in Scotland.
According to SWIP deputy fund manager Kerri Hunter, the vote does not worry them – but they fear it might worry everyone else. “The independence vote adds another layer of uncertainty for risk-averse investors. It gives people another reason not to do things. I’ve heard a few instances where it’s deterred investors, but it hasn’t put us off. At the moment, we don’t think it’s a huge issue.“
Cushman & Wakefield’s Scottish chief David Davidson says European investors have seen it all before. “There’s been a surprisingly low level of concern about the vote from European investors, many of whom have been active all round Europe, and do not see a change in Scotland as negatively as people in London seem to.
“The vote concerns London investors more than European investors, because European investors are used to the uncertainty that changes in sovereignty produce.
“Perhaps it will be more of an issue as we approach 2014.”
The figures have yet to show investors are having doubts. Knight Frank’s Alasdair Steele says: “Look at the current crop of investment transactions – if the vote were a problem, we’d be doing worse than elsewhere in the UK, and we aren’t. Independence has been on the agenda since the SNP won the last Scottish election, and it hasn’t made a difference to the property investment scene.”
