The value of commercial property deals in Scotland plunged more than 25 per cent last year as the ravages of the economic crisis continue to take their toll on both confidence and lending, new figures today will show.
Data published by the Scottish Property Federation revealed that only £1.9 billion worth of deals occurred in 2011, down 25.5 per cent by value, as the number of transactions fell by 9.5 per cent compared with 2010. This was despite a late rally in the last quarter of the year, headed by property deals in a buoyant Aberdeen.
The strong performance in Q4 of 2011 clawed back some of the lost ground, with notable deals including the LaSalle Investment Management’s purchase from BAM Properties of 20-26 Buchanan Street, Glasgow, for a reported £37 million and NewRiver Retail picking up Paisley Shopping Centre for £20m.
But Chris Dougray, head of Lambert Smith Hampton in Scotland, gloomily dismissed the last quarter’s upturn as a pre-Christmas “blip” that has not continued into the new year, as he warned that any uptick in activity in 2012 would likely be driven by banks selling debt portfolios and falling prices.
“The drop in the volume of sales is no surprise, and we should view the fourth quarter as a blip rather a signal of a general upturn in activity,” said Dougray.
“Outwith prime and secure long lease deals we anticipate a paucity of meaningful transactions in 2012. The market is, however, poised for a very significant upturn in activity – but through loan sales.
“Many lenders have flagged to the market that this will be how they seek to deleverage – we witnessed several transactions of this type in the latter half of last year. As the new loan owners work through arrangements with existing borrowers it would seem likely that assets sales will follow but on a re-priced, lower value basis.”
The collapse in sales comes as figures from the Bank of England showed lending to real estate deals across the UK fell for a seventh quarter to £183bn; an 18 per cent decrease on levels seen a year ago.
Alasdair Humphery, head of Jones Lang LaSalle in Scotland, said: “Concern exists in Scotland from the limited capacity shown by the traditional lenders and, while we see new entrants to the market, their activity has not filled the void. It is increasingly apparent that the system is not functioning properly at the moment.”
David Melhuish, director of the Scottish Property Federation, said: “Lack of demand for commercial property increases office and shop vacancies and it does suggest low confidence in the economy if businesses are not expanding or relocating their business premises in Scotland.
“We call on Holyrood to pull back from damaging plans to reduce empty property rate relief and to introduce a planned public health business rates levy on supermarkets.”