There was laughter. There was bonhomie. There was commentary from a top BBC TV journalist. There was drinking – lots of drinking – way into the wee hours. And there were sore heads the following morning. You’d be forgiven for thinking this was referendum night, but actually this was the Scottish Property Federation’s Annual Dinner, held at the end of October, six weeks to the night after the electorate dashed – but only just – SNP’s dreams of an independent Scotland.
“This event has become the de facto social event of the year, so it was rammed,” explained a rather-worse-for-wear agent the following day. The grandeur of Edinburgh’s Balmoral Hotel no doubt helped to soothe the rifts opened up by the seemingly endless referendum campaign, or “neverendum” as the wags had it. On the face of it, the event was very much business as usual.
Under the surface though, things may take a while to settle down. By and large the property industry prefers to leave politics – particularly the divisiveness of party politics – to the politicians. The independence referendum, however, brought political allegiances firmly into the workplace. Although officially agnostic, many property firms quietly backed away from independence. For individuals, though, the first nine months of this year have been trying.
There were plenty of allegations – all off the record, of course – of agents and consultants threatened with losing work if they appeared to support the status quo. Equally, those with a personal preference for independence felt unable to say so for fear of alienating themselves with their colleagues. Simply choosing a tie, scarf or other clothing accessory became a headache, in case it appeared to show favour in one direction.
Since the referendum the veil of secrecy has remained drawn, with all hoping that the unsavoury experiences of 2014 can quickly be consigned to history. David Melhuish, director of the Scottish Property Federation, says: “There was some commentary during the campaign that was over-the-top and that wasn’t right. However, business recognises the need to get back together afterwards. People realise they need to move on.”
What of the impact of the referendum itself? Before 18 September property folk were saying they wanted a decisive result. What they got was a much more keenly balanced outcome. “Politicians backed themselves into a corner – they made the mistake of asking questions when they wouldn’t like the answers.” says Mark Glatman, the Yorkshire-based chief executive of developer Abstract Securities, currently on site with two large office developments in Glasgow and Aberdeen. He adds: “The key now will be to avoid the law of unintended consequences, and that will partly depend on what happens with devolution in the rest of the UK.”
Things may start to become clearer next week when the Smith Commission makes its first report. “Currently there is a lot of uncertainty surrounding the devolution discussions. For example, will corporation tax be devolved?” says Doug Smith, chairman of CBRE Scotland.
The reality is, however, that many powers that affect property directly were already devolved in the 2012 Scotland Act. Future fall-out includes a potential short-term increase in demand for office space to house devolved administrative functions.
Dan Macdonald, chief executive of Edinburgh-based private propco Macdonald Estates, believes there will also be an important, longer-term, legacy of the referendum: “A key effect is that more people are taking an interest in how we can improve the economy.” On that point, surely, everyone can agree.
Long-term fallout
Views on how the Scottish property market has fared since the referendum result seem to depend on which side of the fence commentators were on. Members of the Yes campaign are more likely to suggest that talk of a slowdown pre-referendum and a bounce-back since is just nonsense. No voters, by contrast, are apt to claim that the market ground to a halt over the summer and that there will be a surge of activity to the end of the year. The truth is probably somewhere in between – certainly the Q3 stats show a rise on Q2. CBRE reports that the first incoming call on Friday 19 September at 8.30am was to the capital markets team putting in an offer.
And yet there is a recognition that the situation has altered, although no-one can quite say how. “There hasn’t been a complete return to normality – we don’t know what the landscape is going to be like, so some clients are still holding on,” says Stewart Taylor, director at CBRE’s Edinburgh office. “The occupational market will go forward with a slightly different shape. We won’t go back to how things were – they have changed permanently.”
Empty water rates
Although the Land and Buildings Transaction Tax, due to replace stamp duty in Scotland next April, has hit the headlines, less attention has been paid to a Scottish government proposal to charge owners water and sewerage rates on vacant commercial property. This can only come as a red rag to a property industry still arguing for the abolition of empty buildings rates.
“It will meet with significant resistance,” warns Darina Kerr, partner of Glasgow-based law firm CMS. The problem at the moment is that no-one knows how the Scottish government proposes to levy the charges. The fact that calculating water costs for occupied properties is already hugely complicated is unlikely to help. As a large proportion of these is based on actual usage, which obviously won’t apply to empty buildings, a formula related to rateable value looks likely.
Kerr says: “Based on the minimal 10% concession now given on business rates, there is a concern that the water and sewerage liability for empty properties will not be much less than for occupied properties, and may even be equivalent to the full rate for occupied properties.”
The morning after
As dawn broke over Scotland on Friday 19 September it was accompanied by the final referendum results confirming that a no vote had narrowly prevailed. As many had stayed up most of the night to see which way the scales would tip there were more than a few bleary eyes in property offices across the nation. “What was noticeable was an absence of triumphalism,” recalls an agent who prefers not to be named. “There was a recognition that there were people on the other side and no-one wanted to rub their faces in it.”
In the Scottish Property Federation’s office in Edinburgh the mood was “energised”, says director David Melhuish, while not far away, at law firm Maclay Murray & Spens, partner Alan Stewart describes the atmosphere as “reasonably reflective”. Through a sleep-deprived haze many were starting to consider how the result would affect their work. “Irrespective of personal views people were generally thinking it was a good decision for the property market,” says CBRE Scotland chairman Doug Smith.
Not everyone could be home that morning, though. Chris Stewart, owner of Edinburgh developer Chris Stewart Group, says: “I was in New York, so it was 2am when the result came through.”
One part of the Scottish demographic was more jubilant on 19 September. Women golfers were celebrating a hugely decisive yes result in the vote allowing ladies into membership of the Royal & Ancient in St Andrews for the first time in the club’s 260-year history.
