Commercial rent disputes rise in Scotland as prime supply tightens

Scotland’s commercial property market has seen its first increase in rent disputes since 2016, with landlords adopting a more hardline stance against a backdrop of tightening grade-A supply, according to research from Knight Frank. The agency has obtained figures from the RICS which show there were 67 applications for third-party arbitration in 2023, a 34% increase on the 50 applications in 2022. Arbitrators are called in when landlords and tenants cannot agree rental terms around fixed rent reviews set in the original terms of a lease. The number of applications in 2022 was the lowest in a decade and 2023’s figure is still well below the 10-year average of 123, but Knight Frank believes the increase indicates a change of mood among landlords.   [caption id="attachment_1240379" align="alignright" width="200"] Andrew Hill[/caption] Andrew Hill, Knight Frank Scotland lease advisory partner, said: “During the pandemic, there was greater collaboration between landlords and occupiers, with the former providing rent-free periods and deferring rents in exchange for lease extensions. That was inevitably going to change as conditions normalised and more people came back to the office. “At the same time, prime rents are seeing considerable rises in Edinburgh and Glasgow. Landlords – mainly of prime, grade-A properties – see it as worthwhile to push for increases at the moment, whereas they may not have in previous years. Given the lack of availability of grade-A space in Edinburgh, in particular, there are few options for occupiers to choose from if they were to decide to move within the next year or two.” The figures also reveal that there have been 16 applications for third-party review so far in 2024, which, according to Knight Frank, suggests this year’s total will be relatively low. View market analytics for Scotland >> Photo © Paul Brown/Shutterstock