Lismore investor research highlights opportunities and challenges for Glasgow and Edinburgh, with private sector driving return to ‘normality’

Chris Stewart (CEO of Chris Stewart Group)

EDINBURGH v Glasgow may not have quite the same ring as New York v Boston, but the (friendly) rivalry is just as fierce. In property terms, both cities offer investors something very different. 

Glasgow has an enviable track record of attracting major inward investment – most recently with Barclays opening its 470,000 sqft campus at Buchanan Wharf, while Edinburgh saw one of the largest pre-lettings ever seen in Scotland in 2020, with Baillie Gifford committing to 290,000 sqft at the new Haymarket Square development. Both cities have their good news stories as well as challenges.

With Glasgow, Edinburgh and all city centres recovering from the effects of the pandemic, 81% of respondents in the recent Lismore investor survey identified workers returning to the office as the key factor in vitality returning, along with the return of trade to city centre restaurants, bars and coffee shops.

With 74% of respondents identifying local authority intervention as the least important factor, it is clear that it will be the private sector which will drive the evolution of the high street in the immediate future. 

When questioned about favoured sectors, Lismore investor research confirmed the traditional view that Edinburgh is strong in the office sector and industrial is king in Glasgow. 

43% of respondents listed industrial as their top sector in Glasgow, compared to 33% in Edinburgh, although this is closer than expected. The Edinburgh office market is the sector of choice for 33% of respondents (on a par with industrial!) with only 7% selecting offices as their first choice in Glasgow.

The alternatives sector is very similar in both cities, accounting for 22% of respondents in Edinburgh and 25% in Glasgow. The availability of sites in Edinburgh was highlighted as a limiting factor in comparison to Glasgow. Glasgow remains the dominant retail centre with out of town retail accounting for 14% of responses in the top category compared with 4% in Edinburgh. In town retail accounted for 11% in Glasgow and 7% in Edinburgh.

Whilst the majority of respondents in the Lismore survey are currently cautious about investing in the key retailing pitches of Buchanan Street and Princes Street, a quarter do see the opportunity and a further 32% are willing to consider opportunities in these locations. Property companies are the most bullish at 83%, followed by funds, investment managers and private equity (50%) willing to consider an investment. 

To help understand the market dynamics in each city, Lismore also sought the expert views from Graeme Bone, MD of Drum Property Group and Chris Stewart, Chief Executive of Chris Stewart Group.

Commenting on Glasgow, Graeme Bone, Group MD of Drum Property Group said:

“Glasgow is undervalued compared to other major cities in the UK, with a relatively good supply of development opportunities where there is potential for place making at scale. Real estate fundamentals will always drive the inward flow of equity – build the right thing in the right place and the money will find you.”

“We remain positive about offices in Glasgow. However arguably everyone in the country is in the wrong size of office right now and in addition many will be in facilities that don’t fit emerging corporate ESG aspirations. If managed properly, we should see significant activity in the medium term.”

There will be winners and losers, but there should be a lot of movement. Never has the function of the office and its relevance to organisations been higher up the corporate agenda. Markets go up and down, but we all need churn and there should be a lot of that.”

Commenting on Edinburgh, Chris Stewart CEO of Chris Stewart Group said:

“Edinburgh will continue to inspire investor confidence and interest and our ability to be able to be neutral on sector when identifying the right opportunities in the right locations has allowed us to unlock some complex and challenging sites in the city.”

“The weight of money seeking a home in good real estate deals, alongside a lack of product continues to support the Edinburgh market, buoyed by the prospect of restrictions fading. With sectors and economies reopening, Edinburgh is high on the list for those looking to deploy capital. 

“Many asset classes will bifurcate, with well located, innovative, high quality, sustainable buildings attracting more than their fair share of the market, whilst secondary buildings that fail to satisfy changing occupier demands or deliver the necessary credentials will need to find ways to be repositioned. Our focus will be on creating buildings and income streams that are innovative, relevant, and desirable.”

Investors may have a preference between this pair of vibrant cities but no-one can understand Scotland without paying attention to both. Property aside, it would be a terrible shame if the rivalry were ever settled!

The full Lismore Quarterly Review, including Research Findings & Expert Views is available to download from: HERE 

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