Gloomy first quarter but things have been worse

Standard shop rents in Scotland have been broadly flat for three quarters, resulting in larger than UK average capital declines. Scottish retail property has returned minus 11.3 per cent over the last year, almost in line with the minus 11.8 per cent recorded across the UK.

With the financial services sector stalling, Scottish offices recorded negligible rental growth over the quarter, but annual growth is still fairly solid at 3.6 per cent. Scottish office values fell by 4.5 per cen in Q1 and are now 13 per cent lower than at this time last year.

Hutchison said: “Year-on-year total returns for Scottish offices are minus 8.4 per cent, marginally worse than the UK. However, it should be noted that Scottish offices are vastly outperforming most regions outside Central London.

"Scottish industrials continue to outperform all other sectors in the country and almost all other regions. This is a combination of both very strong rental growth at 5.1 per cent, compared to 1.5 per cent across the UK, and much more muted yield shifts.”

Total returns for Scottish industrial property were minus 2.3 per cent in Q1 and minus 5.1 per cent annually, against an annual return of minus 9.0 per cent in the entire UK. A shortage of new development in Scotland is helping the sector to perform better than the UK as a whole.

Standard shop rents have been flat for three quarters

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Scottish values are continuing to fall - but the rate is slowing down, reports STEWART McINTOSH

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THE value of commercial property in Scotland fell in value by some 2.9 per cent during the first three months of 2008 – compared with a fall of more than 7 per cent during the last quarter of 2007, according to the latest Scottish Property Quarterly report from CB Richard Ellis.

Scotland’s 2.9 per cent fall in Q1 2008 slightly outperformed the UK as a whole, which saw a 3.3 per cent drop. Despite some variation in the timing of the falls, capital values across both the UK and Scotland have fallen 13.9 per cent in the last year. Mitigating some of the negative yield impacts, Scottish rental growth intensified over the quarter to 0.7 per cent, the strongest quarterly uplift since Q4 2006.

Scotland’s retail rental growth was strong in the first quarter of 2008, having been particularly weak throughout last year. Keith Hutchison of CBRE’s Edinburgh office said: “Any strength was solely attributable to retail warehouses where rental values surged over the quarter”.

The growth spurt helped Scottish retail warehouses to outperform their UK counterparts, with capital values falling by just 4.3 per cent in Q1 compared to a 5.3 per cent drop across the UK.