As the return to the office gets underway in earnest, investment into the Scottish commercial property market is seeing a resulting uplift, with Colliers noting that several deals have seen a ‘bidding war’ take place. This year has seen investment volumes in Glasgow reach almost £150m to date, with this number expected to rise significantly in Q4. This is after an unsurprisingly quiet 2020 where investment volumes reached a low of £82m. this was approximately 40% of the volume transacted in 2019 and considerably below the 10-year average volume of circa £220m.
In particular demand are office properties that will meet the changing nature of working patterns; providing increased collaboration space, a flexible approach to desk layout and ample cycling, showering and parking facilities. Under considerable scrutiny are the ESG and sustainability credentials of assets, those that target net zero emissions, with low density levels and that have potential for mixed use are proving most popular.
Colliers pointed to the recent bidding war around its purchase last month of the Aurora building at 120 Bothwell Street in Glasgow, from M&G, for European fund manager Forma Real Estate, as a sign of the long-term demand for offices. The fully-let prime city centre property, originally built in 2006, covers around 174,000 square feet and is Forma’s first UK acquisition.
Patrick Ford, director, National Capital Markets at Colliers in Glasgow, said: “Forma fought off stiff competition from a significant number of parties at the closing date for the Aurora building, regarded as the most high-profile value-add office opportunity in the UK regions for a number of years”.
Chris Taylor, UK CEO of Forma Real Estate, commented: “We are delighted to have completed our first acquisition in the UK so soon after the launch of the Fund. Aurora is a high-quality asset and offers significant optionality in terms of our asset management strategy. The Glasgow office market currently suffers from a shortage of high-quality Grade A accommodation, yet strong occupier demand. We are confident Aurora, with our planned improvements to the building, will provide an attractive option to tenants over the short to medium term, as they continue their phased return to the office”.
As Scotland continues to navigate out of the pandemic, the successful vaccination programme has provided an attractive proposition for overseas investors who are encouraged by a return to near normality. Colliers stated that there has been a pickup in enquiries from the US, Europe and the Far East, in particular, as travel restrictions ease.
The commercial property investment management firm is calling for more clarity from the Scottish Government to help businesses get their colleagues back to the office in a safe and consistent way.
He added: “I would like to see our First Minister being more prescriptive around a plan for getting people back to the office and working with businesses to make this as smooth a transition as we all adapt to the ‘new norm’”.
“Many corporates, such as financial services providers, have reaffirmed their commitment to the office. Office space remains essential for many sectors, in particular those that are highly regulated with specific security needs. Much needed clarity would allow for quicker decisions from both tenants and investors.
Ford concluded: “There can’t be a ‘one size fits all’ approach. Investors are looking for office space that will encourage workers to return by offering them a flexible, attractive and safe environment”.
