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Mark Jones, Director of Office Agency at DTZ comments:
There is no doubt that Edinburgh weathered “the perfect storm” in 2009. The financial services sector was rocked to its very core and this in a city which headquarters both RBS and HBOS. There was nervousness in the entire market as the recession gripped and unsurprisingly, office take-up fell by around 20% from 2008 levels.
As the year draws to a close, there is a sentiment that Edinburgh is over its worst. The city’s financial houses have stabilised without catastrophic rationalisation in staffing numbers and while the business community in Scotland’s capital has undoubtedly felt the pinch, few companies have gone under.
In looking forward, next year will remain challenging. There is still likely to be downward pressure on rental levels, although not much further outward movement in incentives. We are predicting increased occupier confidence and an upward, albeit fragile, swing in take-up during the second half of 2010 to total take-up for the year at around 550,000 sq ft. Our message: if you want the best deal, there is a six month window of opportunity starting now.
Alasdair Steele Investment Director at DTZ comments:
2009 was very much a year of two halves – in the first six months there was almost a complete lack of investment transactions whereas the UK institutions and overseas money returned with a vengeance in the second half of the year leading to increased levels of activity and hardening prices, particularly in the prime and yield and covenant sectors.
The weight of money seeking to invest is such that prices are likely to hold up in the first half of the year, with a continued focus on good quality, low risk product, due to the weak state of many occupier markets. There are two factors which as of yet are not clear – what will be the impact of the general election if, as we expect, it is held in May of next year, and will the sheer weight of money seeking to invest cause investors to pay even keener prices, or will they elect instead to focus on slightly riskier opportunities where pricing is more generous and competition less keen.
Robert McDowall, Development Consulting Director at DTZ comments:
Times are difficult in the public sector and are likely to be so for a few years yet as budgetary pressures continue to prevail. The forthcoming General Election and Comprehensive Spending Review will provide little respite and it is against this backdrop that public bodies must take the opportunity for greater partnership working with their neighbours in order to ensure the provision of services in the most cost effective manner.
We can already see this emerging in the Local Authority network in Scotland and the ‘emergency services’ are beginning to join in this agenda as well.
Efficiencies are likely to come through both in occupational requirements as well as in the procurement of services/resources and while capital receipts from the sale of land, etc. will continue to be slow, there is the likelihood that well structured deals can be concluded that will see capital receipts emerge as the market turns upwards in the next few years.
Chris Dougray, Corporate Recovery Director at DTZ comments:
"It is increasingly apparent that many of the banks are ready to implement their strategies for property in Q1/Q2 of 2010. I anticipate that there will be few open market sales but rather the banks will consider revised asset management strategies either with, or potentially without, their existing borrowing customers. Uncertainty prevails relative to action that NAMA may take, and it will be very interesting to see what that impact this may have on the market.
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