A glut of money will encourage a shift of investment in commercial property, according to Stuart Orr, a director in Scottish commercial property agency FG Burnett.
He believes the secondary market will increasingly become an option for investors who previously focussed on prime.
Orr, a member of FG Burnett’s investment team in Glasgow, said: “It’s ironic that there is an increase in the amount of money allocated to commercial property, sitting in the system waiting to be utilised, but there isn’t sufficient stock available to invest in.
“The real paradox is that those same investors who are in funds are holding on to their own stock until they can buy first, which when magnified across the market, creates a massive demand/supply imbalance.”
Orr cited a recent example in Glasgow city centre where a prime retail and office block was withdrawn from sale quickly after it had been put on the market: “It’s another sign that there is a weight of money pressure on already cash rich investors.”
Orr said the restricted activity has already showed signs of converting to hardening yields, particularly in the prime and long income markets.
He added: “Coupled with increasing business confidence being reported, it is predicted that the secondary market will attract more interest to counter-balance the keener prime yields, but particularly so as the secondary market is anticipated to improve through 2014 and outperform prime in 2015.
“This will represent a major change in the market as investment has for the last few years principally sought the relative security offered by prime assets. Drawing from our recent experience of the Aberdeen market, it’s better to get in early if you are looking for value, before the influx of capital starts hardening the yields.”
