SCOTLAND'S commercial property market is managing to ride out the economic storm thanks to strong office activity in Aberdeen and a buoyant industrial sector.
But office lettings in the country's two biggest cities – hit hard by the credit crunch – will struggle to gather momentum before 2010.
Those are two of the key findings in Ryden's 63rd biannual Scottish Property Review.
The report, which detai
ls every major office, retail and industrial letting and investment deal over the last six months, is seen as a trusted benchmark of the Scottish commercial property marketplace.
According to the firm, office market demand is running at "about average" levels, as slowing activity in Glasgow and Edinburgh is offset by high demand in the Granite City.
Ryden said Edinburgh's office market continued to rely on existing occupiers, particularly law firms and accountants looking to move to more modern premises.
Encouragingly, it also noted a number of requirements from financial services firms "despite turbulent times".
In Glasgow, where office take-up has fallen by just over a fifth in the past year, only two large deals exceeding some 1,000 square metres have been recorded within the city centre since April.
In contrast, office take-up in Aberdeen rose by 10 per cent in the six months to the end of September, buoyed by "healthy" demand from oil and gas businesses.
Mark Robertson, Ryden's head of consulting and author of the report, said: "The occupational market has been slower than the investment market to feel the impact of the credit crunch.
"We've seen companies take a bit longer to make decisions to move to new property and that has had an impact on take-up and lettings.
"The market is still cautious, but unlike previous downturns things haven't hit a brick wall."
Occupational activity, or a lack of it, in the commercial property sector is taken as a barometer for the general wellbeing of the economy.
Robertson suggested a "third wave" of the credit crunch was breaking across the property market.
"The first wave diminished investment values," he said. "The second halted development projects. The third is the impact on the business economy, as occupiers evaluate their property needs."
As plans for new developments fall prey to the credit squeeze, Ryden forecast a "dearth" of office completions in Glasgow before 2011.
It noted that, in Edinburgh, no major office schemes were scheduled to complete in 2010. Although planning consents have been obtained for key projects in Haymarket and Caltongate in the city, both developments are unlikely to provide office space before 2011/12.
Roberston predicted a recovery in take-up activity in Edinburgh by 2010, in line with a number of economic forecasts, adding: "I think we are still going through the low point in the cycle."
He added that value was beginning to return to the property investment market, which has suffered badly as investors seek out safer havens.
Ryden believes that the fall in investment values will probably bottom out "within the next six months".
Robertson said industrial property had been "largely a good news story" in 2008. "There is still steady demand for sheds of all sizes and the market is pretty active," he added.
The full article contains 540 words and appears in The Scotsman newspaper.
