Aberdeen Local Development Plan Review Proposal for a site to be included in the Main Issues Report

The Proposed Strategic Development Plan does not require us to allocate extra housing or employment land in the next Local Development Plan (LDP). Because the 2012 LDP identi ¿ed a signi ¿cant number of green ¿eld sites to accommodate these requirements, we are not looking to allocate any more green ¿eld housing or employment land in this plan. It is for this reason that we are not asking for green ¿eld development options this time around. However, we are always keen to identify new brown ¿eld sites for housing or for other uses. Please use this form to provide details of the site that you wish to have included in the Main Issues Report for consideration as a proposal in the next Aberdeen Local Development Plan.

One of the purposes of this form is to inform a public debate on the merits of the different sites being proposed. All information submitted will therefore be made available to the public to promote a transparent and open process.

Please feel free to provide any further information you feel appropriate to support your submission. The City Council has produced a Sustainability Checklist which provides guidance on the issues which will be used to help us judge the merits of competing development options. This can be found on www.aberdeencity.gov.uk/localdevelopmentplan

Please ensure your proposal is with us by 14th June 2013.

Using your personal information

Information you supply to Aberdeen City Council (ACC) in this form will be used to prepare the Local Development Plan. The information provided will be made public and will be placed on the Council’s website. This will include the name and address of the proposer and landowner.

The Local Development Plan team may also use your contact details to contact you about the information you have provided.

For further information on how your information is used, how ACC maintain the security of your information, and your rights to access information ACC holds about you, please contact Andrew Brownrigg, Team Leader, Local Development Plan Team, Enterprise Planning and Infrastructure, Aberdeen City Council, Business Hub 4 Marischal College, Broad Street, Aberdeen AB10 1AB.

8 If you are proposing housing on the site please provide details of what you think would be appropriate, both in terms of the number of dwellings, and their forms (flats, detached houses, terraces etc).

NotApplicable.

9 It is likely that there will be a requirement for 25% of the housing within the development to be affordable. If applicable, are you considering more or less than this figure?

25% More Less

10 If you are proposing business uses please provide details of what you would market the land for? [Please make sure the area of land proposed for business use is shown on the site plan]

Business and offices (Use Class 4) X

General industrial land (Use Class 5) X

Storage and distribution (Use Class 6) X

Do you have a specific occupier in mind for the site? Yes No

11 If you are proposing uses other than housing or business please provide as much detail as possible on what you propose. [Examples could include retailing, tourism, renewable energy, sports, leisure and recreation, institutions and education.]

NotApplicable.

12 Will the proposed development be phased? Yes No

If yes, then please provide details of what is anticipated to be built and when.

Itisanticipatedthatthedevelopmentwouldbebroughtforwardinthefirstphaseofthe LocalDevelopmentPlanduringthetimeperiod2017to2026.

13 Has the local community been given the opportunity to influence/partake in the development proposal?

Yes No Not Yet

If there has been any community engagement please provide details of the way in which it was carried out and how it has influenced your proposals. If no consultation has yet taken place, please detail how you will do so in the future.

ThesitewaspreviouslyincludedintheProposedAberdeenLocalDevelopmentPlan,whichwas publishedinSeptember2010.ThesitewasdesignatedintheplanasOpportunitySiteOP79Blackhillsof Cairnrobinfordevelopmentof3.5hectaresofemploymentland.Theplanwassubjecttopublic consultationatthattime.ThesitewasremovedfromthefinalisedLocalDevelopmentPlanfollowing representationsbytheoperatorsofBlackhillsQuarryonthegroundsthatthesitelaywithin400metresof astand-offbufferzonedesignatedbytheHealthandSafetyExecutive,applicabletoBlackhillsQuarry. The400metrebufferzoneisnolongerapplicableandthisisconsideredlaterinthisproposalstatement. Sustainable Development and Design 14 Have you applied principles of sustainable siting and design to your site? The City Council has produced a Sustainability Checklist which provides guidance on the principles of sustainable siting and design and other issues which can be found on www.aberdeencity.gov.uk/localdevelopmentplan

Please provide the following information:

A) Exposure – does the site currently have

Little shelter from northerly winds

Some shelter from northerly winds

Good shelter to northerly winds

B) Aspect – is the site mainly

North facing

East or west facing

South, south west or south east facing

C) Slope – do any parts of the site have a gradient greater than 1 in 12?

Yes

If yes, approximately how much (hectares or %)

No

D) Flooding – are any parts of the site at risk of flooding?

Yes

If yes, approximately how much (hectares or %)

No

E) Drainage – do any parts of the site currently suffer from poor drainage or waterlogging?

Yes

If yes, approximately how much (hectares or %)

No

F) Built and Cultural Heritage – would the development of the site lead to the loss or disturbance of archaeological sites or vernacular or listed buildings?

Significant loss or disturbance

Some potential loss or disturbance

No loss or disturbance

G) Natural conservation – would the development of the site lead to the loss or disturbance of wildlife habitats or species?

Significant loss or disturbance

Some potential loss or disturbance

No loss or disturbance H) Landscape features – would the development of the site lead to the loss or disturbance of linear and group features of woods, tree belts, hedges and stone walls?

Significant loss or disturbance

Some potential loss or disturbance

No loss or disturbance

I) Landscape fit – would the development be intrusive into the surrounding landscape?

Significant intrusion

Slight intrusion

No intrusion

J) Relationship to existing settlements – how well related will the development be to existing settlements?

Unrelated (essentially a new settlement)

Partially related

Well related to existing settlement

K) Land use mix – will the development contribute to a balance of land uses, or provide the impetus for attracting new facilities?

No contribution

Some contribution

Significant contribution

L) Accessibility – is the site currently accessible to bus, rail, or major road networks?

Bus Route Rail Station Major Road

Access more than 800m away x

Access between 400-800m x

Access within 400m X

M) Proximity to services and facilities – How close are any of the following?

400m 400m-800m >800m

Community facilities x

Local shops x

Sports facilities x

Public transport networks x

Primary schools x

N) Footpath and cycle connections – are there any existing direct footpath and cycle connections to community and recreation facilities or employment?

No available connections

Limited range of connections

Good range of connections O) Proximity to employment opportunities – are there any existing employment opportunities within 1.6km for people using or living in the development you propose?

None

Limited

x Significant

P) Contamination – are there any contamination or waste tipping issues with the site?

Significant contamination or tipping present

Some potential contamination or tipping present

X No contamination or tipping present

Q) Land use conflict – would the development conflict with adjoining land uses or have any air quality or noise issues?

Significant conflict

Some potential conflict

x No conflict

If there are significant conflicts, what mitigation measures are proposed?

R) Physical Infrastructure – does the site have connections to the following utilities?

x Electricity

x Gas

x Water and Sewage

If you are proposing housing, is there existing school capacity in the area?

Secondary Capacity

Primary Capacity

Are there any further physical or service infrastructure issues affecting the site?

ThelandatBlackhillsofCairnrobinwaspreviouslyremovedfromtheadoptedLocalDevelopmentPlan becauseitwasconsideredtoliewithin400metresofastand-offbufferzonedesignatedbytheHealth andSafetyExecutive,applicabletoBlackhillsQuarry,whichliestotheeastofthesite.Ithassince beenconfirmedbytheoperatorsofBlackhillsQuarryintheirapplicationtoextendthequarry (ReferenceP130490)thatthereisno400metrezoneapplicabletothequarryandthattheHealthand SafetyExecutivedoesnotsetspecificstand-offzonesforblastingoperations.Thequarryoperators haveconfirmedtoHermistonSecuritiesLimitedthatanydangerzonestothewestofthequarrywillbe confinedwithintheirlandholdingsatalltimesandtherewillbenorequirementtorestrictvehicularor pedestrianmovementsontheunclassifiedCovetoFindonRoadwhichliesbetweentheQuarryand theBlackhillsofCairnrobinsite.Inadditionalandscapedscreeningmoundwillbecreatedalongthe westernboundaryofthequarryextensiontoensurevisualandacousticscreeningforthebusiness usestothewest.Giventhechangeincircumstancesitisconsideredthatthequarryoperationsdonot provideanyimpedimenttothelandatBlackhillsofCairnrobinbeingbroughtforwardforemployment developmentandthesiteshouldbeconsideredagainassuitableforbusinessandindustrialuseinthe LocalDevelopmentPlan.Alandscapedbufferzoneonthenorthandwesternedgesoftheproposal sitewillprovidefurtherseparationbetweenthequarryandtheemploymentuses.Accesstothesite willbetakenfromtheGatewayBusinessParkandthelandtothesouthatMainsofCairnrobin.No accesswillbetakenfromtheCovetoFindonRoadwhichisusedasaccesstoBlackhillsQuarry. 15 No site is going to be perfect and the checklist above will inevitably raise some potential negative impacts from any development. Where negative impacts are identified, please provide details of their nature and extent and of any mitigation that may be undertaken. Listed below are examples of further information that may be included in your submission;

Included Not applicable

Contamination Report

Flood Risk Assessment

Drainage Impact Assessment

Habitat/biodiversity Assessment

Landscape Assessment

Transport Assessment

Other as applicable (e.g. trees, noise, dust, smell, retail impact assessment etc please state)

16 Does the development proposal give any benefits to the community? If so what benefits does the development bring, and how would they likely be delivered?

Community benefits can include new community facilities (such as local shops, health, education, leisure and community facilities), affordable housing, green transport links and open spaces. Include elements which you anticipate may be required as developer contributions from the development. (Please note, specific contributions will have to be negotiated with the Council on the basis of the proposal.)

ThetakeupoflandatAberdeenGatewayBusinessParkhasrisenconsiderablyoverthepastfewyearsand thereisthereforeanurgentneedtosupplementthelandsupplyatGatewayifdemandfromcompanieswho requireasouthAberdeenlocationforworkshopandwarehouseaccommodationistobemet.Theallocationof thelandatBlackhillsofCairnrobinwillhelpcreateadditionalemploymentopportunitieswithinAberdeen throughprovidingnewlandfordevelopmentandhelpingremoveconstraintstothedevelopmentofconsented landatMainsofCairnrobinbytheprovisionofaconnectinglinkroadtotheAberdeenGatewayBusinessPark. ItwillalsoprovideemploymentincloseproximitytoexistingandproposedresidentialdevelopmentatCoveand Loirston,thusprovidingopportunitiesfortravelreductionbetweenworkandhome.

WhilstitisacknowledgedtherehavebeenrecentadditionstothemarketableemploymentlandsupplyatDyce andBridgeofDon,thisdoesnotaddressdemandfromcompanieswhohaveaspecificrequirementforasouth ofcitylocation.ThesupplyofotheravailablelandtothesouthoftheCityislimited,withthebulkofthe remaininglandatAltensEastcurrentlyunderoffertooccupiersandthelandatBalmoralParkreservedfor business/officeuseonly.

ItisrequestedthatthelandatBlackhillsofCairnrobinisallocatedinthenewLocalDevelopmentPlantothe timeperiod2017-2026forbusinessandindustrialuse.

17 If you have prepared a framework or masterplan showing a possible layout for the site, please include it with this form.

Masterplan/ Framework attached Thank you for taking the time to complete this form. Please return completed forms to:

Local Development Plan Team Enterprise, Planning and Infrastructure Aberdeen City Council Business Hub 4 Ground Floor North Marischal College Broad Street Aberdeen AB10 1AB

Or email it to: [email protected] March 2013 www.aberdeeencity.gov.uk

Supporting Statement

Representations to Aberdeen Local Development Plan Review

Prepared on behalf of Hermiston Securities Limited

13 June 2013

Contact details

Knight Frank LLP, 4 Albert Street, Aberdeen, AB25 1XQ Malcolm Campbell , 01224 415949, [email protected] KF ref: 312269

Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN where you may look at a list of members’ names. Contents

1. Introduction 3

2. Representation on OP78 Charleston 3

3. Representation on OP76 Souter Head Road 5

Supporting Statement – LDP Review Representations KF Ref: 312269 Page 2 Prepared on behalf of Hermiston Securities Limited │1 3 June 2013 1. Introduction

1.1 Knight Frank LLP w ere appointed by Hermiston Securities Limited to submit representations to the Aberdeen Local Development Plan Review. The two representations considered in this supporting statement are not seeking to bring forward new greenfield sites for development but wish to see changes made to the phasing of employment land at Charleston, Cove and the location of a retail development opportunity moved from a site at Souterhead Road, Altens to a site at Loirston, Nigg. This statement should be read in conjunction with the attached Local Development Plan Review Pre - Main Issues Report Questionnaire

2. Representation on OP78 Charleston

Aberdeen Local Development Plan (2012)

2.1 The land at Charleston, Cove is identified in the adopted Aberdeen Local Development Plan as Opportunity Site OP 78. It is allocated for 20.5 hectares of employment land for the time period 2024 to 2030. The sit e also forms part of the Loirston Development Framework, which was approved a s Supplementary Guidance in May 2013. As the site is allocated for a later phase of the Local Development Plan the framework has not explored the development site in much detail, although indicative access points and development parcels have been illustrated for the purposes of the framework. Key character aspects identified are to : • Integrate with Aberdeen Business Gateway site on east side of Wellington Road; • Existing watercourse to be retained and improved to continue improvements which are planned north of Wellington Road within OP77; • Connect to open space at north of Aberdeen Business Gateway site and expand through to proposed open space areas adjacent to proposed AWPR junction; • Encourage and enhance connectivity to Cove; and • Protect and implement green corridor along Wellington Road in association with pedestrian/cycle routes to Cove.

2.2 Hermiston Securities Limited, who own the majority of the land at Charleston welc ome the allocation of this land for employment use. The land at Charleston is not scheduled to be released for development until 2024. Hermiston Securities Limited believe that there are compelling reasons for why this land should be brought forward earl ier for development in the new Local Development Plan. This is based on the need to maintain a marketable supply of employment land in Aberdeen and in the south of the City in particular. The current high take up of employment land and the strong demand for sites from companies suggests that we will run short of suitable land in the south of the City long before 2024 and there is a need to

Supporting Statement – LDP Review Representations KF Ref: 312269 Page 3 Prepared on behalf of Hermiston Securities Limited │1 3 June 2013 supplement the supply now by bringing forward the land at Cha rleston. Further consideration of the land supply and t he factors influencing demand is given below. Employment Land Supply and Demand

2.3 The high levels of e conomic activity currently being experienced in the north east of Scotland are unprecedented. Given Aberdeen’s role as the energy capital of Europe this has fuelled demand for land in the City for industrial and business use on the back of a high and stable oil price , new government tax relief measures and continued major investment in exploration in the North Sea by the leading oil and gas comp anies. According to the latest annual report from leading think tank Centre for Cities, Aberdeen’s economy ranked as the best performing of 64 UK cities in the initial downturn of 2008-09, and subsequently ranked in the top five UK cities for performance over the ‘recovery’ period of between 2009 and 2012. Evidence of the demand for land for industrial and business use can be found in the following attached supporting documents:

• Knight Frank’s Aberdeen Industrial Market Activity Report (Winter 2012);

• Knight Frank’s Aberdeen Office Market Activity Report (Spring 2013); and

• Ryden’s Scottish Property Review (April 2013). 2.4 The take up of land at Aberdeen Gateway Business Park, which lies immediately to the south east of the Charleston site has risen consider ably over the past few years. There are currently two developments for oil and gas service companies due to begin construction in 2013, which will see 5 acres taken up. An application will also shortly be lodged for an occupier which will take up a further 11 acres at Gateway. The remaining undeveloped land at Gateway is either comprised of a few small sites suitable only for a limited range of occupiers or the land is restricted to Class 4 Business use by virtue of its proximity to residential areas at Cove which lie immediately to the north of the Gateway site. There is therefore an urgent need to supplement the land supply at Gateway if demand from companies who require a south Aberdeen location for workshop and warehouse accommodation is to be met. Whilst it is acknowledged there have been recent additions to the marketable employment land supply at Dyce and Bridge of Don, this does not address demand from companies who have a specific requirement for a south of city location. The supply of o ther available land to the south of the City is limited, with the bulk of the remaining land at Altens East currently under offer to occupiers and the land at Balmoral Park reserved for business/office use only.

2.5 Whilst there is employment land allocated in Aberdeenshire immediately to the south and east of the Gateway site at Mains of Cairnrobin, this has been constrained for a number of years as a result of land ownership and infrastructure issues. Hermiston Securities Limited are in negotiations with the landowners at Mains of Cairnrobin with a view to acquiring some of this land to accommodate future growth . This however , if the current constraints can be overcome, will deliver only a limited amount of employment land which at the best will ensure a sup ply of land until

Supporting Statement – LDP Review Representations KF Ref: 312269 Page 4 Prepared on behalf of Hermiston Securities Limited │1 3 June 2013 2016/17.

2.6 Further considerations which support bringing forward the release of land at Charleston are the construction of the AWPR, with completion due in early 2018 it will make the location at Charleston more attractive to potential occupiers and stimulate further demand which will need to be satisfied well before 2024. Development will also start soon on a major new housing development at Loirston, which is located immediately to the north of the Charleston site. There is also cons iderable new housing development already underway at Cove. The early provision of land at Charleston provides the opportunity to provide employment close to people’s homes and help reduce the need to travel. The earlier release of the land at Charleston would also take advantage of the investment in infrastructure at Aberdeen Gateway Business Park and the new development at Loirston and help contribute towards it s provision.

2.7 It is requested that the phasing of Opportunity Site OP78 Charleston is broug ht forward in the new Local Development Plan to the time period 2017 -2026.

3. Representation on OP76 Souter Head

3.1 Land at Souter Head Road, Altens, Aberdeen is identified in the adopted Aberdeen Local Development Plan as an Opportunity Site (OP76) for retailing. The site is currently occupied by the Thistle Aberdeen Altens Hotel building and car park. Since approval of the Local Development Plan there have been no planning applications submitted or approved to demolish the hotel and replace it with a r etail use such as a supermarket or shopping centre. 3.2 Hermiston Securities Limited considers it highly unlikely that this site will deliver the retail development opportunity identified in the Local Development Plan. The site is occupied by one of the major hotels serving the southern part of the City. The hotel is well located for the main road network with good access to the City Centre and Harbour and the A90 Trunk Road. It is also very well located to serve the many businesses within the imme diate area at Tullos, Altens, Wellington Road and Aberdeen Gateway and the major residential areas at Cove, Kincorth and Torry. The hotel also has no comparable competition within this part of the City. Given the City and the hotel’s current high occupancy rates and the buoyancy of the local economy it is considered that there is no possibility in the near future of the hotel use being discontinued on this site to make way for retail use. A further consideration is the traffic impact that a large superma rket or small superstore would have on the Souter Head roundabout junction. As far as we are aware this has not been tested and our transportation engineers believe it would be difficult to accommodate the traffic generated from a major retail use on this site on the local network, especially given the level of consented and allocated development proposed for the south of the City. In terms of site values this is not a viable proposition and therefore a retail use is not deliverable on this site and co nsideration should be given in the review of the Local

Supporting Statement – LDP Review Representations KF Ref: 312269 Page 5 Prepared on behalf of Hermiston Securities Limited │1 3 June 2013 Development Plan to moving the retail development opportunity (OP76) to another location within the south of the City.

3.3 The number of suitable alternative sites is limited, however a site is available within Local Development Plan Opportunity Site OP77 . The site has been identified through the masterplan process undertaken recently for Loirston. It is identified in the Loirston Development Framework at the southern end of the site and ha s the capacity to accommodate a neighbourhood shopping centre for which it has been identified for and a large supermarket/small superstore as currently allocated to OP76 . The Loirston site is in control of the joint venture partners and developers of Loi rston, Hermiston Securities Limited and Aberdeen City Council. The site is deliverable and conveniently located to serve the south of the City and help reduce the need to travel to locations such as Garthdee and Portlethen . It will be accessible by publi c transport. Work undertaken by our transportation engineers indicates it can be accommodated on the local traffic network. The location also has sufficient prominence to attract an operator to the site.

3.4 It is understood that t he Aberdee n and Aberdeenshire Retail Study prepared in 2004 is currently being updated by consultants and will be reported to the two Councils in September 2013 . The finding from this update of the retail study should be used to inform the size and scale of the retail opportunity required to serve the south of the City. 3.5 It is requested that retail opportunity site OP76 be removed from Souter Head Road and reallocated within Block B3 as identified in the approved Loirston Development Framework.

Supporting Statement – LDP Review Representations KF Ref: 312269 Page 6 Prepared on behalf of Hermiston Securities Limited │1 3 June 2013 research

Spring 2013 Aberdeen Office market activity report

Highlights

• Significant investment in the North Sea oil and gas industry propelled Aberdeen’s office market to another record year in 2012. The city saw total take-up of 883,000 sq ft last year, 14% above 2011’s previous high.

• With space and development opportunities limited in the city core, out-of-town locations dominated 2012 activity, accounting for 76% of annual take-up.

• At £31.50 per sq ft, Aberdeen’s office market commands the highest prime headline rent of any key market outside London and the South East.

• Office investment turnover reached £203m in 2012, more than double the level seen in each of the previous two years. Investors are attracted to the relative strength of Aberdeen’s occupier demand, evidence of rising rental levels and the quality of covenants associated with the oil and gas industry. Spring 2013 Aberdeen Office market activity report

Economic overview Aberdeen has been one of the UK’s real economic success its runway, while the Aberdeen Western Peripheral Route (AWPR) will stories amid tough macro-economic conditions in recent now go ahead following a judgement by the UK Supreme Court, with years. According to the latest annual report from leading completion currently scheduled in 2018. think tank Centre for Cities, Aberdeen’s economy ranked as the best performing of 64 UK cities in the initial downturn of Figure 1 Capital investment in the North Sea oil and gas industry 2008-09, and subsequently ranked in the top five UK cities for performance over the ‘recovery’ period of between 2009 15 and 2012. 12 Unlike any other city in the UK, Aberdeen’s economic performance depends heavily on the fortunes of the North Sea oil and gas industry. 9 While falling oil production has impacted on UK economic growth over the past two years, sustained high oil prices and Government 6 tax relief measures have spurred massive capital investment to support future extraction, stimulating economic activity in the city. 3 Major commitments include the £4.5bn Claire Ridge project to the

West of Shetland and Statoil’s £6bn commitment in the Mariner and 0 Bressay fields. 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 0 8 9 6 6 4 Key infrastructure projects will also enhance Aberdeen’s long term 4 2 3 3 7 7 5 5 1 inward investment and growth prospects. Capacity at Aberdeen Actual capital investment Forecast International Airport has been increased with a £124m extension of Source: Oil & Gas UK £ b n (

Figure 2 n o Aberdeen office take-up and oil prices m Occupier market i n a l

1,000 ) 160 Significant investment in the North Sea oil and gas industry 140 propelled Aberdeen’s office market to another record year 800 120 in 2012. The city saw total take-up of 883,000 sq ft last l

t year, 14% above 2011’s previous high and almost double the f 600 100 e r r q a s 10-year annual average. b s

80 r 0 e 0 p

0 400 60 $ Aberdeen’s performance is striking when viewed in context with the UK’s other key markets, almost all of which saw 2012 take-up lag 40 200 their 10-year average. This clear divergence of fortunes reflects the 20 uniqueness of the energy sector to Aberdeen’s market, which directly 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 accounted for three quarters of all space transacted in 2012.

Existing space Pre-let prior to Brent Crude oil price Pre-let agreements have become a prominent feature of the construction (annual average) market, reflecting strong demand and a shortage of suitable supply. Source: Knight Frank Research / Thomson Reuters 2012 saw eight pre-let deals which together accounted for 50% of annual take-up. Headline deals included Nexen, Apache and Transocean committing to Phase 1 of Prime Four, Kingswells, totalling 300,000 sq ft, and Bibby Offshore’s pre-let of 54,000 sq ft at Prospect Park, Westhill.

Availability across the city is restricted and equates to a vacancy rate of 4.5%, significantly below the majority of UK office markets. Moreover, less than 15,000 sq ft is Grade A quality, with much of the remainder deemed unsuitable by current occupiers. Indeed, corporate occupiers in the city are increasingly using the quality of their In May 2012, Bibby Offshore pre-let 53,427 sq ft at Pavillion 1, Prospect Park, Westhill. accommodation to attract a limited pool of highly skilled professionals Knight Frank acted for Bibby Offshore and completion is scheduled for April 2013. in the energy sector.

2 www.KnightFrank.com

There is an acute shortage of supply in the city core, with the only Figure 3 Grade A space available confined to 9,400 sq ft at Dee Bridge 2012 office take-up vs 10-year average House, Leggart Terrace. The lack of choice and limited development 100 opportunities in the city core partly explain the recent dominance in out- 80 of-town activity, which accounted for 76% of 2012 take-up, with many of 2012’s headline deals involving an outward relocation from the city core. 60 40 For the last four years, Aberdeen has commanded the highest prime headline rent of any key markets outside London and the South East. 20 Headline rents currently stand at £31.50 per sq ft although, aside from % 0 several small deals in Aberdeen’s West End, the lack of prime space in -20 the city centre resulted in no significant transactional evidence at this level over the past 12 months. -40 -60 l l r y s 5 e n h d d ff w t l o o m l e i 2

The Aberdeen market is also unique in terms of the limited incentives d i e t t g n t o a o e d r e s e s C s E r g M i h p u e a e d r t ffi r s a n g r L c b s h e e

on offer. While occupiers in the UK’s other regional markets can B a C o e n l n c e v w h i i d i b G n e S d L W n m A a N r typically expect a two to three year rent free period for a ten year lease, E o i n M L o B in Aberdeen, occupiers currently receive a maximum of three months’ d n o rent free for good quality space, down from an average of six months’ L rent free a year ago. Source: Knight Frank Research

The current strength of demand has also brought about a rapid erosion in the rental differential between the city core and out-of-town locations along the ‘Western Corridor’. By way of example, at the North Dee Business Quarter, GDF Suez’s 40,375 sq ft pre-let from Miller Cromdale was agreed at £29.50 per sq ft and set a new rental high for the area. More recently in 2013, Premier Oil’s 62,000 sq ft lease at Phase 2 Prime Four was agreed at £27.75 per sq ft, a dramatic rise on levels seen last year.

Significant investment in the North Sea oil and gas industry propelled Aberdeen’s office market to In May 2012, GDF Suez pre-let 40,375 sq ft at North Esplanade West. The agreed rent of another record year in 2012. £29.50 per sq ft is a new high for the North Dee Business Quarter.

Table 2 Key office transactions in 2012

Address Tenant Size (sq ft) Rent (£ per sq ft) Date Abercrombie Court, Arnhall Business Park Fairfield Energy 25,504 £17.50 Jan 12 Quattro House, Wellington Circle, Altens Petrofac 44,425 £21.50 Apr 12 Plot 1, Prime Four, Kingswells Nexen Petroleum UK Ltd 100,000 £23.25 May 12 Plot 2, Prime Four, Kingswells Apache North Sea Ltd 100,000 £23.00 May 12 Plots 3/4, Prime Four, Kingswells Transocean Drilling UK Ltd 96,795 £21.77 (office element) May 12 Pavilion 1, Prospect Park, Westhill Bibby Offshore Ltd 53,427 £20.00 May 12 GDF Suez House, North Esplanade West GDF Suez E & P UK Ltd 40,375 £29.50 May 12 Pavilion 2, Prospect Park, Westhill Bluesky 18,785 £21.50 Jul 12 Pavilion 3, Westpoint Business Park, Westhill AMEC Plc 12,573 £22.50 Nov 12 Pavilion 3, Prospect Park, Westhill Teekay Petrojarl 18,785 £22.85 Dec 12 Source: Knight Frank Research

3 Table 3 Selected schemes in the pipeline (March 2013)

Scheme Size (sq ft) Owner/Developer D2 Business Park 800,000+ Miller Developments Aberdeen Energy & Innovation Parks 700,000+ Buccleuch Property / Scottish Enterprise Axcess, Portlethen 750,000 Stewart Milne Developments Aberdeen International Business Park 400,000 Abstract Group St Nicholas House, Broad Street 350,000 Aberdeen City Council (For Sale) Phase 2, PrimeFour, Kingswells c.300,000 Drum Property Group Ardent House, North Esplanade West 173,460 Miller Cromdale RGU Schoolhill Campus, St Andrew Street 150,000 Robert Gordon University Aberdeen Gateway Business Park, Cove 150,000 StocklandMuir Former Seafood Park Site, Poynernook Road 120,000 Jacaranda Holdings Ltd (Under Offer) The Pinnacle, Shiprow 100,000 Ardent Group City View Business Park, Wellington Road 94,500 Knight Property Group Triple Kirks, Schoolhill 72,600 Stewart Milne Developments Silver Fin, Justice Mill Lane 70,000 Titan Investors Source: Knight Frank Research

Despite the constraints on development finance, Aberdeen is one of For the last four years, the few UK markets to have seen concerted speculative development since the downturn, with 92,000 sq ft delivered in 2012 and 70,000 sq Aberdeen has commanded ft presently under construction. Knight Property Group and Gladman the highest prime headline have been the most active developers, with newly completed schemes rent of any key market at Prospect Park and Westpoint Park letting-up aggressively on completion, while City View, Wellington Road is understood to be outside London and the attracting strong interest. South East. Aberdeen has a considerable 3.2m sq ft of consented office space in the pipeline. While much of the new development will continue to come via pre-lets, additional schemes are expected to progress in 2013, KNIGHT FRANK view with prominent schemes in Dyce comprising Miller Developments’ D2 Business Park and Abstract’s Aberdeen International Business • While take-up in 2013 is not expected to surpass 2012’s record Park, Dyce. Development opportunities are far more restricted in total, the expansion of investment in the North Sea oil and gas the city centre, with possible schemes in the pipeline first requiring industry points to another exceptional year for the market. Active development funding or a pre-let. demand remains strong, with a range of prominent requirements including Wood Group, Senergy, AMEC and Statoil.

• With Grade A supply constrained, much of this demand will continue to manifest itself via new build pre-let arrangements. Demand will also remain focused in the key out-of-town locations, where there is greater development opportunity.

• Headline rents are expected to remain under upward pressure throughout 2013. However, any further increase in city core prime headline rents beyond £31.50 per sq ft will be contingent on new supply coming forward via a pre-let arrangement.

• The longer term prospects for the office market have been enhanced by announcements on key infrastructure improvements, particularly AWPR. This new link-road will boost accessibility to Aberdeen’s most prominent out of town

The Hub, Aberdeen Energy Park comprises 15,000 sq ft of flexible office accommodation locations and boost the prospects of major new developments and completed in 2012. Its developer, Buccleuch Properties/SE, has instructed Knight Frank as the joint letting agent. in the pipeline.

4 www.KnightFrank.com

Investment market Despite the strong occupier market, investors continue to exercise caution towards secondary assets and are much more sensitive on Aberdeen has emerged as one of the few bright spots of pricing. However, when priced correctly, sales are taking place - investment demand across the UK’s office markets beyond Ediston purchased Caledonian House, Union Street reflecting a net Central London. The number and type of investors looking initial yield of 9.10%, with several other secondary assets under offer at the city has increased, attracted to the relative strength of at the time of writing. occupier demand, clear evidence of rising rental levels and Figure 4 the quality of covenants associated with the oil and Office investment transactions gas industry. 250 70 Investment in Aberdeen’s offices reached £203m in 2012, more than 60 double the level seen in each of the previous two years. The result 200 is impressive when placed into context with the subdued picture 50 for Scotland as a whole. In 2012, Aberdeen accounted for 45% of 150 40 m investment in Scottish offices, set against a ten-year average of 17%. % £ 100 30 However, two deals accounted for over two thirds of 2012 volumes. The largest by far was F&C REIT’s purchase of Phase One, Prime Four, 20 50 Kingswells for £94.0m from developer Drum Property Group, with the 10 deal signed following confirmation of the three pre-let agreements by 0 0 Nexen, Apache and Transocean. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

The other major deal saw Middle Eastern investor Gatehouse Bank £m % of Scotland total debut in the city with their £59.9m purchase of Bridge View & Consort Source: Knight Frank Research/Property Data House at North Esplanade West. The deal reflects the widening of interest from a range of investors than in previous years, with the traditional UK Funds competing with new overseas investors for KNIGHT FRANK view assets offering long-term income. • As long as buying opportunities are made available, Aberdeen Prime yields for Aberdeen offices stand at c.6.50%, which is is expected to remain a key hotspot of investment demand perceived to offer relatively good value given the more challenging in 2013. Pre-let developments and new-build sale and occupier market conditions evident in the UK’s other key regional leasebacks will be particularly sought-after, both in the city markets. However, due to the limited availability of prime stock in the centre and out-of-town, with investors buying long income city centre, there was no transactional evidence to confirm pricing at streams backed by strong covenants from the energy sector. this level in 2012. • In contrast with the dynamics of other key regional markets, However, that said, the prices paid in 2012 indicate that yields are another important draw to Aberdeen’s office market is hardening elsewhere beyond the city core, reflecting Aberdeen’s the prospect of further rental growth for both prime and positive occupier story and investor demand for long income assets. secondary assets. Buoyed by the strength of the occupier For example, Ignis’ £13m purchase of Technip’s 58,000 sq ft HQ in market, investors are expected to increasingly venture further Westhill at 7.25% and the 6.83% yield paid for Phase One, Prime Four, up the risk curve, with a view to exploiting the potential for Kingswells illustrates the sharp improvement in sentiment towards reversionary rental uplift. out-of-town assets.

Table 4 Key investment transactions in 2012

Property Size (sq ft) Price (£ millions) Net initial yield (%) Purchaser Prime Four, Kingswells 299,749 £94.00 6.83% F&C REIT Bridge View/Consort House, North Esplanade West 159,170 £59.90 7.15% Gatehouse Bank St Magnus House, Guild Street 80,180 £18.30 8.66% British Airways Pension Fund Duncan House, Enterprise Drive, Westhill 58,322 £13.00 7.27% Ignis Asset Management Quattro House, Wellington Circle, Altens 44,997 £11.65 7.99% Lumina Real Estate Caledonian House, 232-234 Union Street 48,535 £7.75 9.10% Ediston Source: Knight Frank Research

5 RESEARCH

Americas Commercial Research Aberdeen USA Oliver du Sautoy Associate Eric Shearer Partner Bermuda +44 (0)20 7861 1592 Development & Investment Brazil [email protected] +44 (0)1224 415 948 Canada [email protected] Caribbean Chile Katherine Monro Partner Disposals & Acquisitions Australasia Australia +44 (0)1224 415 962 New Zealand [email protected] Europe Chris Ion Senior Surveyor UK Disposals & Acquisitions Austria +44 (0)1224 415 969 Belgium [email protected] Czech Republic Malcolm Campbell Associate France Planning Germany +44 (0)1224 415 949 Hungary [email protected] Ireland Italy Douglas Garden Partner Monaco Building Consultancy Poland +44 (0)1224 415 940 Portugal [email protected] Romania Russia Richard Evans Partner Spain Valuations & Rent Reviews Switzerland +44 (0)1224 415 952 The Netherlands [email protected] Ukrai ne Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Knight Frank Research provides strategic advice, consultancy services and Zambia Zimbabwe forecasting to a wide range of clients worldwide including developers, investors, Asia funding organisations, corporate institutions and the public sector. All our clients Cambodia recognise the need for expert independent advice customised to their specific needs. China Hong Kong Knight Frank Reports are also available at www.knightfrank.com India Indonesia Macau © Knight Frank LLP 2013 Malaysia This report is published for general information only. Although high standards have been used in the Singapore preparation of the information, analysis, views and projections presented in this report, no legal responsibility South Korea can be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from the Thailand contents of this document. As a general report, this material does not necessarily represent the view of Vietnam Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part The Gulf is allowed with proper reference to Knight Frank Research. Bahrain Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Abu Dhabi, UAE Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. research

winter 2012 Aberdeen Industrial market activity report

Highlights

• The buoyancy of the North Sea oil & gas industry has fuelled strong demand in Aberdeen’s industrial market. Building on 2011’s strong performance, take-up is projected to reach a 10-year high of 800,000 sq ft in 2012.

• Strong demand has put significant pressure on existing supply. As a result, an increasing number of occupiers have had to relocate to other areas in order to satisfy their requirements.

• At £8.50 per sq ft, Aberdeen’s prime industrial rents are the highest in the UK outside London and the Thames Valley. Meanwhile, strong occupier demand has narrowed the rental premium between prime and good quality secondhand space to just 15%.

• The strength of Aberdeen’s market, coupled with oil and gas related covenants, has spurred significant demand from institutional investors. However, activity is being constrained by a lack of buying opportunities and restrictive lending on riskier assets. winter 2012 Aberdeen Industrial market activity report

Economic overview Aberdeen is widely regarded as the energy capital of Europe, Brown Field Allowance will shield up to £500m of oil and gas income with the Aberdeenshire region home to in excess of 1,000 derived from mature oil and gas fields, saving firms up to £160m. companies operating within the North Sea energy industry. While Importantly, it is widely expected to increase the viability of extraction, Aberdeen’s economy and property market are heavily reliant and could attract a further £2bn of investment to this sector. on this sector, it is also vital to the UK economy, supporting 440,000 jobs nationwide.

The well-documented success of Aberdeen’s energy sector has been driven by the high and relatively stable oil price seen throughout 2011 and 2012, with the price of Brent Crude generally above $100 per barrel throughout this period. Renewed confidence has been reflected in several major investments announced by leading oil and gas companies with, for example, BP, Chevron, Conoco and Shell’s decision to collectively invest almost £10bn in North Sea oil exploration.

The sector received another boost in September following the The North Sea oil industry continues to drive Aberdeen’s economy government’s partial U-turn on the taxation of oil profits. The new

Figure 1 Industrial take-up Occupational market Aberdeen’s industrial market is dominated by the North Sea oil 900 and gas industry. Distribution and trade counter operators have a 800 limited presence in the market, with the vast majority of industrial 700 occupiers engaged in energy-related activities. While the nature of 600 t f this demand has traditionally focused on units below 20,000 sq ft, q

s 500

s 2012 has seen a surge in demand across all size ranges. 0

0 400 0 300 Confidence in the oil industry has been reflected in buoyant market activity, as many industrial occupiers have sought to upgrade their 200 accommodation or expand their operations following new contracts. 100 Following a marked improvement in take-up in 2011, take-up in 2012 to-date 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 stands at 750,000 sq ft and is projected to reach a 10-year high of 800,000 sq ft by year end (Figure 1). Despite the strength of activity, however, take- Take-up Projected take-up up is arguably being constrained by both a lack of existing supply and Source: Knight Frank Research restrictions on debt finance which is hindering new development.

Five key transactions have accounted for 30% of take-up in 2012 to date. These include Cameron’s £3.975m owner-occupier purchase of the Carron Facility at Badentoy, RST Trading Ltd’s lease of an additional 52,000 sq ft at Wellheads Terrace and Expro’s assignation of Halliburton’s lease at the Cairn Facility in Dyce. The smaller end of the market also forms an important part of Aberdeen’s demand profile, particularly so in recent months, with sub 5,000 sq ft units at terraced schemes accounting for 22% of 2012 take-up.

A severe shortage of supply within Aberdeen’s established industrial estates has forced a host of occupiers to relocate to unfamiliar surroundings, particularly in search of units in excess of 10,000 sq ft. While a number of companies have moved from north to south, around Altens, the most notable trend has been a movement of occupiers to the west. Notable westward relocations this year include ASCO and Petrofac committing to a combined 120,000 sq ft at Kintore, Advantec and Elliott In June 2012, Ashtead Technology leased Discovery Drive, Westhill at a headline rent of Group establishing bases within Kirkwood Commercial Park, Inverurie £8.50 per sq ft. Knight Frank acted for the landlord and HB Rentals acquiring 30,000 sq ft near Sauchen.

2 www.KnightFrank.com

Aberdeen industrial and business areas

PITMEDDEN ROAD

KIRKHILL 100 THE CORE DYCE

STONEYWOOD ABZ DENMORE KEY 54 40 D2 150 Built up areas A96 ABERDDEEEN BRIDGE OF DON ENERGY PARK Existing industrial estates A90 Proposed Aberdeen Western EXHIBITION Peripheral Route (AWPR) CENTRE X Acres of available employment land

As the market has matured the 10 Source: Knight Frank Research original established estates such as WESTHILL KINGSWELLS Kirkhill, Bridge of Don, Tullos and CITY CENTRE Altens are now being supplemented A90 by modern estates including HARBOUR Badentoy and Aberdeen Gateway to the south, ABZ, D2 and The Core to EAST TULLOS the north and Westhill. 20 WEST PETERSEAT TULLOS CULTS

20 ALTENS EAST MILLTIMBER ALTENS PETERCULTER 17 BALMORORAL

45 ABERDEEN GATEWAY PARK

40 BADENTOY A90

Source: Knight Frank Research

Table 1 Selected occupier transactions in 2012

Address Transaction Occupier Area (sq ft) Rent per annum / Price Date

Carron Facility, Badentoy Freehold purchase Cameron 54,815 £3.98m Jun 12 Z3, Badentoy Freehold purchase Stauff 20,732 £2.90m Jun 12 Wellheads Terrace, Dyce New lease RST Trading Ltd 52,075 £442,000 p.a. Aug 12 Cairn Facility, Dyce Assignation Expro North Sea Limited 43,516 £380,000 p.a. Sep 12 Aberdeen Gateway Freehold purchase Coretrax 11,700 £1.67m Sep 12 Unit 8, Minto Commercial Park, Altens New lease Rotech Subsea 15,720 £211,500 p.a. Oct 12 Unit 3, Minto Commercial Park, Altens New lease Pipelines 2 Data 15,161 £190,000 p.a. Oct 12

Source: Knight Frank Research

3 At £8.50 per sq ft, Aberdeen’s prime industrial rents are the highest Park and The Core which together have the potential to provide of any UK market outside London and the Thames Valley area. Rents 250 acres. have been relatively stable at this level since 2008, and largely reflect Aberdeen’s prevailing high land values of c.£450k per acre, rather Reflecting the sheer weight of occupier demand, Aberdeen is one of than being driven by market demand. Recent transactions at new- the few UK industrial markets to have seen speculative development build developments such as Carnegie’s Discovery Drive, Westhill and in recent years. The handful of schemes which have been developed Gilcomston Investment’s two units at Raiths Industrial Estate, Dyce speculatively, such as Carnegie Property’s Discovery Drive and confirmed prime rents at £8.50 per sq ft. Stockland Muir’s Aberdeen Gateway, have proven very successful, attracting strong commercial terms and no voids.

Figure 2 The lack of debt finance has nevertheless continued to deter Prime industrial rents (units under 20,000 sq ft) speculative development, with the majority of developers holding

14 out for design and build packages on long-term leases. However, following the success of the above-mentioned schemes, other 12 developers are now pressing ahead with speculative development. For example, Buccleuch Property has launched an initial phase of 10 three new units in Aberdeen Energy Park while Ribnort and Dandara t f 8 have committed to developing sites in Dyce and Westhill respectively. q s r e

p 6 £ 4

2

0 l l r n n n n h g ff w o o m e i e o o o n t g t o a o i t d t r e s s d r g i h p d p p u e d r n r s a g a r b h o e B m a m C e e n l n c L v i a a i i R b G n t h h d L m A t t s a r E r i u e M o B o W N S

Source: Knight Frank Research

While prime rents have held steady, increased demand has led to a clear narrowing in rental levels between prime and secondhand space. Headline rents for good quality secondhand buildings currently stand Stockland Muir’s speculative development at Aberdeen Gateway was purchased by at c. £7.50 per sq ft, having increased by 15% since 2010. Landlords Special Piping Materials in January 2012 have reaped the benefits, with minimal void periods, limited incentive packages and headline rental growth. Notable deals in 2012 include Uniconn, Pipelines 2 Data and Sabre Safety, each of whom recently agreed 10-year leases. KNIGHT FRANK view The owner-occupier market has also been surprisingly strong. Rather than renting, some occupiers have opted to deploy their capital • Although occupier demand is strong enough to warrant concerted reserves to acquire new-build accommodation. For example, Stockland speculative development, ongoing restrictions on debt finance will Muir completed two speculative developments at Aberdeen Gateway continue to impact on the level of activity in the short term. that subsequently sold to Special Piping Materials and Coretrax, • As a consequence, we anticipate occupiers with larger while GSS Developments’ Z3, Badentoy also sold in 2012 for a price requirements to turn increasingly towards design and build of £2.9m. These deals established prime industrial capital values at solutions over the next 12 to 18 months. However, given that in £140 per sq ft. many cases occupiers continue to prefer the greater flexibility Following years of constrained land supply, 2012 saw a substantial associated with leasing existing accommodation, landlords could increase in the availability of development land. There is currently benefit from undertaking refurbishment. in excess of 500 acres of employment land being actively promoted, • We expect 2013 to see exceptional deals with rental rates reaching marketed or developed. For example, Ribnort, Balmoral and Chap have £9.00 per sq ft, albeit confined to the most sought after locations. each completed servicing and infrastructure works to supplement the However, while the sharp increase in development land is welcome, established business parks of Aberdeen Gateway, Aberdeen Energy the competition it brings will ensure that the majority of prime deals Park and Peterseat Park, totalling an additional 80 acres. Elsewhere, will remain at £8.50 per sq ft. Miller Developments and Generate Land have launched D2 Business

4 winter 2012 Aberdeen Industrial market activity report

Investment market While the challenging economic backdrop continues to impact the majority of the UK’s markets outside London, Aberdeen’s buoyant occupier market and restricted level of supply make a compelling case for investment in the city’s office and industrial markets. Funds and institutions are increasingly attracted to the Aberdeen market, backed by strong oil and gas covenants and a perception that the city currently represents good value in comparison with the UK’s other regional cities.

Industrial investment in Aberdeen has reached £71m in 2012 in the year to date, and has already eclipsed 2010’s previous record of £67m. However, the actual number of deals has been broadly Knight Frank was recently instructed by Carnegie Property Company to sell Claymore comparable with previous years with two transactions in excess of Drive, Bridge of Don, totalling 30,201 sq ft £10m boosting overall turnover.

The largest deal in 2012 was CBRE Global Investors’ £19.9m purchase Prime industrial yields currently stand at c.7.00% in Aberdeen of Wellheads Industrial Centre. The 218,725 sq ft multi-let industrial although, as with elsewhere in the UK regions, buying opportunities estate had a Weighted Average Unexpired Lease Term (WAULT) of are extremely rare in this segment of the market. Indeed, the last 5.5 years. The price paid reflected a net initial yield of 7.61% and a investment sale at this level took place in 2011, where Palmer Capital reversionary yield of 8.78%. purchased the Smith International Facility in Badentoy, a modern facility let to a strong covenant for 15 years. If prime opportunities do Figure 3 become available, Aberdeen’s strong occupational story will inevitably Industrial investment attract investors with mandates to invest in the UK regions.

80 12 While the majority of funds are typically looking to acquire larger 70 lot-sizes in excess of £10m, buying opportunities for this type of stock 10 have been in short supply. Consequently, the market has followed 60 a similar trend to the previous two years, with activity focused on N o 50 8 .

o lot-sizes ranging from £3m to £7m with equity-backed funds and f t r £ a 40 institutional investors driving transactional activity. m n 6 s a c 30 t Activity for smaller lot-sizes ranging from £1m to £3m has typically i o

n 4 s 20 been the preserve of private individuals, family trusts or property companies. Unsurprisingly, however, this segment of the market 10 2 has been very subdued in recent years, due to a combination of 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0 restricted debt finance and limited motivation to sell among owners. to date Indeed, of late, the majority of purchases in this sector have been by £mNumber of transactions owner-occupiers, with one exception being FWM Limited’s £2.31m Source: Knight Frank Research/Property Data purchase of Discovery Drive, reflecting a net initial yield of 7.55%.

Table 2 Selected investment transactions in 2012

Address Area (sq ft) Price Purchaser Vendor NIY (%) Date

Minto Avenue, Altens 86,267 £11.5m Ropemaker Properties Stainton Group 8.50 Apr 12 Noskab House, Badentoy 28,825 £4.4m Cedarwood Asset Management Stainton Group 9.19 Jul 12 Wellheads Industrial Centre, Dyce 218,725 £19.9m CBRE Global Investors F&C Reit 7.61 Jul 12 Discovery Drive, Westhill 13,682 £2.31m FWM Ltd Carnegie Property Company 7.55 Oct 12

Source: Knight Frank Research

5 research

Americas Commercial Research Aberdeen USA Oliver du Sautoy Associate Eric Shearer Partner Bermuda +44 (0)20 7861 1592 Development & Investment Brazil [email protected] +44 (0)1224 415 948 Canada [email protected] Caribbean Chile Katherine Monro Partner Australasia Disposals & Acquisitions Australia +44 (0)1224 415 962 New Zealand [email protected] Europe Neil Young Associate UK Disposals & Acquisitions Austria +44 (0)1224 415 951 Belgium [email protected] Czech Republic Malcolm Campbell Associate France Planning Germany +44 (0)1224 415 949 Hungary Ireland [email protected] Italy Douglas Garden Partner Monaco Building Consultancy Poland +44 (0)1224 415 940 Portugal [email protected] Romania Russia Richard Evans Partner Spain Valuations & Lease Advisory Switzerland +44 (0)1224 415 952 The Netherlands [email protected] Ukrai ne Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Knight Frank Research provides strategic advice, consultancy services and Zambia Zimbabwe forecasting to a wide range of clients worldwide including developers, investors, Asia funding organisations, corporate institutions and the public sector. All our clients Cambodia recognise the need for expert independent advice customised to their specific needs. China Hong Kong Knight Frank Reports are also available at www.knightfrank.com India Indonesia Macau © Knight Frank LLP 2012 Malaysia This report is published for general information only. Although high standards have been used in the Singapore preparation of the information, analysis, views and projections presented in this report, no legal responsibility South Korea can be accepted by Knight Frank Research or Knight Frank LLP for any loss or damage resultant from the Thailand contents of this document. As a general report, this material does not necessarily represent the view of Vietnam Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part The Gulf is allowed with proper reference to Knight Frank Research. Bahrain Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Abu Dhabi, UAE Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names. Ryden72ndpropertyreviewcoveraw1/5/1309:59 Page 1

April/13: 72nd ScottishPropertyReview TheScottisheconomycontinuestofollowapost-bankingcrash trajectoryratherthanthemorefamiliarandshorterbusinesscycle rebound.Economicindicatorsincludinggrowth,employmentand confidencearehoweveralignedmorepositivelythaninrecentyears.

Officemarketactivityhasreducedacrossthecountry,althoughlatent demandcanbeidentifiedandspeculativedevelopmenthasbeen rekindledinGlasgow.Theindustrialsectorisactive,particularlyin Aberdeenandforsmalltomediumpremises.Retailmarketactivity continuestofavourthefoodsectorandprimedestinations.

Themarketwillcontinueitsslowclimboutoflow-levelequilibrium asnewinvestmenttargetstheemergingcycle.InAberdeenongoing activitywillsustainthatmarketathighlevels.

DRMARKROBERTSON , PARTNER Economy &Planning

Economy JobGains Since2009,economicforecastshave KPMGplanstocreate150jobswhenitopensaTaxCentreforExcellenceinGlasgow predictedadifficultcurrentyearfollowed duringsummer2013 byrecoverytosustainablegrowth.This OverthenextdecadeutilitiesfirmScottishPowerplanstocreate2,500jobsatits continuesandnormalgrowthisnow energynetworksdivision forecastfor2014/2015. ContactcentreoperatorTeleperformanceplanstoincreaseitsworkforceinScotlandby afurther500bytheendof2013 •ScottishGDPgrewby0.5%duringthe fourthquarterof2012.Thiscontributed USsoftwarefirmSASistocreate94newjobsandsafeguard126existingrolesinEast Kilbridewiththecreationofananadvancedanalyticslaboratoryaswellasthe toanannualriseof0.4%,abovetheUK expansionofitsresearchfacilities riseof0.1%.Duringthefourthquarter USmedicaltechnologyfirmDaktariDiagnosticsplanstocreate126newjobswiththe outputinScotlandroseinallsectors: openingofafactoryinInverness servicessector(0.3%),productionsector NorwegianoilfirmStatoilplans200newjobsinAberdeenand500positionsoffshore (1.1%)andconstructionsector(0.6%). aspartofitsMarinerdevelopmentintheNorthSea Withintheproductionsectorhowever, manufacturingoutputcontractedby-0.5%. JobLosses ThomasCookisclosing18ofitstravelagencystoresinScotlandwiththelossof84jobs •TheConsensusforecastforUKeconomic FollowingtheadministrationofelectricalretailerCometaround700jobswerelost growthpublishedbyHMTreasuryinApril acrossScotlandwiththeclosureof34stores,whileatcamerachainJessopsaround100 2013predictsgrowthof0.7%during2013 jobswerelostwiththeclosureof12storesinScotland and1.5%for2014.ForScotland,Fraserof LawfirmSempleFraserwentintoadministrationwiththelossof120staffacrossoffices AllanderInstitute’scentralforecast, inGlasgow,EdinburghandManchester publishedinMarch2013,isforapickup InterflooristocloseitsTredairedivision(carpetunderlay)atHeathhallinDumfrieswith of0.9%in2013and1.7%in2014,rising thelossof53jobs to1.9%in2015. Atotalof33textilemilljobshavebeenlostwiththeclosureofCaerleeMillsin Innerleithen •BankofScotland’sPurchasingManagers IndexforMarch2013identifiesonly TheClydesdaleBankistoshed51positionsinScotlandwiththeclosureofitsfinancial advicedivisionforprivateandbusinessbanking moderategrowthinnewbusinessbut thehighestlevelsofjobcreationfor eightmonths. •CompaniesHousereportsatotalof458 Insummary,evidenceofeconomicgrowth, •TheScottishunemploymentclaimant businessliquidationsinScotlandinthe fallingunemploymentandincreasing countwas4.9%inFebruary2013,down sixmonthsfromSeptember2012(4.1% confidencesuggestthattheweaknessesof from5.2%inFebruary2012.Thebroader oftheUKtotal).Thisisadecreasein thepastfiveyearsmayatlastbeabating. ILOmeasureofunemploymentfellona boththenumber(835)andtheUKshare quarterlybasisto7.3%forthethree ofliquidations(7%)comparedwiththe Planning monthsDecember2012–February2013, precedingsixmonths. ProcessingAgreements andwasdownby0.8%overtheyear. ProcessingAgreements(PAs)were •RetailsalesinScotlandwere0.9%higher •TheCommitteeofScottishClearing introducedtoassistthesmoothtransition onalike-for-likebasisoverthe12months Bankersconfirmsthenumberofnew ofcomplexapplicationsthroughthe toMarch2013(ScottishRetailConsortium businessaccountsopenedduringthe planningsystem.Uptakeofthesevoluntary /KPMG).Furthercommentontheretail secondhalfof2012totalled5,807. agreementsbetweenlocalauthoritiesand sectorisprovidedonpage12. Thiswasdownby14%fromthesame applicantsforplanningpermissionhas periodin2011.Thelargestshareofnew •AccordingtotheDepartmentofEnergy beenslow;howevertheyhavebeenthrust businesses(1,319or23%)wasinthereal andClimateChange,indigenous intothespotlightaspartoftheScottish estate,rentingandotherbusinesssector. productionofcrudeoilfellby18.8%in Government’s PlanningReform:NextSteps thefourthquarterof2012compared agenda ,whichaimstosimplifyand withthesameperiodof2011.

2 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 streamlineprocesses.Thishasinvolved PAsareintendedastransparentproject overdevelopmentplanstendtobe trainingseminarswithlocalauthorities managementtools,ratherthancomplex dominatedbytheeffectivenessofhousing throughoutScotlandonthepracticaluse agreements,howeverbuy-inisrequired landsupply,apossiblesolutioncouldbe andbenefitsofPAsandthepublicationof fromagenciesandstakeholderstoensure theReporterindicatingmorelandwould aPAtemplate. allpartiesareawareoftheirresponsibilities. beneededinthefuture,andthiswould Notallstakeholdersneedbesignatories beamaterialconsideration. ThebenefitsofPAsshouldbeincreased toanagreement,indeedthiscanadddelay. transparencyforallparties,stakeholder ItremainstheresponsibilityoftheCouncil Onthistheme,Aprilsawthepublication engagementatanearlystageand asawholetomanagethenecessary ofacriticalreportbytheDirectorateof agreementofkeyprojectstagesanddates, consultationprocesses,thereforea PlanningandEnvironmentalAppeal(DPEA) leadingtogreaterawarenessandclarityof soundunderstandingofrequirements intoSESplan,theproposedStrategic timescalesandrequirements,clearerlines andtimescalesbyallpartiesiscrucial DevelopmentPlanforSouthEastScotland. ofcommunicationand,hopefully,theholy toanapplication’ssuccess. Thecontroversialplanhadbeen grailoffasterdecision-making. condemnedbythedevelopmentindustry Inessencehowever,anythingwhichopens foritsunambitiousapproachto ExperienceofPAshasbeenlargelypositive thelinesofcommunication,simplifiesthe developmentthatcouldbecharacterised forbothdevelopersandlocalauthorities; planningprocessandpromotesco-operative as‘planningtofail’andalackofguidance forexampleofthe23PAsagreedwith workingistobewelcomed. onthelocationofdevelopment,particularly AberdeenCityCouncilsince2009,19of housing.TheDPEAupheldtheseobjections theseapplicationsmettheirspecified MaterialConsiderations andhasrequestedthattheentireissue targetdates–asuccessrateof83%. AsreportedinRyden’sOctober2012 ofhousingisre-examinedthroughanew Withtheincreaseinplanningfeesbeing Review,theScottishGovernmentis document(SupplementaryGuidance), linkedtoimprovedperformancethis undertakingareviewofScottishPlanning anunprecedentedstep.Inakeyfinding, isapositiveexample. Policy(SPP)inanefforttoupdatethe itstatesthatthehousingmarketdownturn contentandbringitinlinewiththe2006 isnotanadequatereasonfordepressing PAsarenowexpectedtobecomethe Actandtheeconomicrealitiesfollowingthe thehousinglandrequirement,norisit normpriortosubmissionofapplications 2009crash.Adraftdocumentwillbe commensuratewithavisionforthe formajordevelopments,althoughtheir publishedaftertheEasterParliamentary SouthEasttobeakeydriverofthe usemaynotbeappropriateinall recessandconsultationwillcommence. Scottisheconomy. circumstances.PAsarealsopromoted whereapplicationsforLocalDevelopments OneareainwhichSPPcouldhelpfacilitate Despitethisverdict,CityofEdinburgh areexpectedtobecomplexorcontentious. betteroutcomesfortheplanningsystem CouncilispublishingitsProposedLocal isstrengthenedguidanceonmaterial DevelopmentPlan(LDP)inMay.TheDPEA WhiletheagreementofaPAisno considerations,whichthePlanningMinister recentlyupheldRyden’sappealinrelation guaranteethatadevelopmentwillbe DerekMacKayMSPhashintedatinrecent toahousingapplicationatEdmonstone approved,itmaybeusefulinpersuading speeches.Section25ofthe2006Actstates Estate,Edinburgh.Thiswasonthebasis anauthoritynottorushtowardsrefusal. that:“proposalsshouldbedeterminedin thatalocalauthoritymustensureafive Anon-determinationappealcannotbe accordancewiththedevelopmentplan yearhousinglandsupplyisavailableatall lodgeduntiltheexpiryofthePAtimescale, unlessmaterialconsiderationsindicate timesandthatitisnotsufficienttorelyon regardlessofthestatutorytimescales. otherwise”.Whilesignificantprogresshas theallocationofsitesinLDPs,whichcould Experienceinthedraftingandagreement beenmadetoreducethetimescalestaken besubjecttodelay.Despitearecognised ofPAsshowsthatpre-application toadoptup-to-dateplans,theScottish urgentneedforeffectivehousingland, engagementwithstakeholdersand Governmentacknowledgesthatprogress planningauthoritiescanstillbereluctant consulteesiscrucialtoidentifyandresolve isnotuniversalacrossthecountry,with toenterintodiscussionswiththose potentialissuesearly;similarly,agreeing only60%ofdevelopmentplansbeing seekingtopromotenon-allocatedsites. datesforregularreviewmeetingsassists lessthanfiveyearsold. Amoreco-operativespiritisneededto inkeepingthelinesofcommunicationopen. seedevelopmentdeliveredindifficult Inarecenttalk,theChiefPlannerJohn economictimes. McNairneysuggestedthatsincedebates

RYDEN SCOTTISHPROPERTYREVIEWAPRIL20133 Office Property

OfficesalesandlettingsacrossScotland’s Themostnotabletransactionswithinthe floorsgreaterthan1,394sq.m.Thereare threelargestcitiesfellby37%overthe largerGradeAsectorwerelimitedtoSpeirs fiverefurbishedbuildingsthatcanprovide pastsixmonths(82,000sq.m.)compared &JeffreyatGeorgeHouse,GeorgeSquare greaterthan1,858sq.m.,fourofwhich withthepreviousperiod(131,000sq.m.). (1,387sq.m.)andCapQuestatCapella, canprovidegreaterthan3,716sq.m.Two ThemainreasonisadipinAberdeen YorkStreet(1,013sq.m.),alongwithIrwin ofthese,GeorgeHouseand123StVincent followinglastyear’smarketspike– Mitchelltakingrefurbishedspaceat150 Street,canprovidefloorsgreaterthan althoughunderlyingactivityremainsstrong StVincentStreet(959sq.m.). 1,394sq.m.Inaddition,thereissignificant –andarelianceinEdinburghandGlasgow secondhandspaceavailable,generally onsmallertransactions.Onamuch Onegoodnewsstoryjustafterthedata linkedtoshorttermresidualleases. morepositivenote,speculativeoffice cut-offforthisReviewisKPMG’sselection developmenthasresumedinGlasgow. ofGlasgowforaTaxCentreforExcellence ActivityatbusinessparkswithinGlasgow creating150jobs(in1,395sq.m.at123 hasalsoslowed.Notabledealsare: In Glasgow citycentre,threedevelopers StVincentStreet).Thisinvestmentfollows SouthsideHousingAssociationpurchased havedecidedthatthetiminginthemarket detailedassessmentofcompetingUK StrataHouseatCardonaldBusinessPark cycleisnowopportune.Speculative regionalcitiesandunderlinesGlasgow's (1,486sq.m.);FosterCareAssociationtook developmentisunderwayatBAM offerofhighqualitypeopleandskillsallied Pavilion3GatewayOfficePark(820sq.m.) Properties'110QueenStreet(13,285sq.m.) tocompetitivecostandavailabilityof andMatrixControlSolutionsexpanded andatPRUPIM/Mountgrange's1West appropriateproperty. intoanotherflooratPavilion6,Junction RegentStreet(12,540sq.m.),bothwithan 24,Govan.TheHubatPacificQuayhas additionalelementofgroundfloorretail. Thetake-upfigurestakenoaccountyet achievedsevensmalllettingsofbetween Thethirddevelopment,AbstractSecurities’ ofScottishPower'scommitmenttoanew 17–155sq.m.overtheperiod,withfurther StVincentPlaza(15,794sq.m.),isalso 20,450sq.m.headquartersatthewestend dealsinthepipeline.ClydeGatewayhas expectedtocommenceonsiteshortly. ofStVincentStreet,norGlasgow2014’s nowcompletedtheOlympiaBuildingand Completionsarelikelytorunthroughlate continuingexpansionofcirca1,000sq.m.at RedTreeBusinessCentreatBridgetonis 2014tomid/late2015. CommonwealthHouseintheMerchantCity. achievingsomeearlylettings.Therehave alsobeenfurtherlettingsattheVenture Anothermajorvoteofconfidenceisthe Thisprivatesectorcommitmenttoprovide BuildingandBlock6atWestofScotland InternationalTechnologyandRenewable topquality,environmentallyefficient ScienceParkandatTheWhiteStudios, EnergyZone(ITREZ)developmentat GradeAnew-buildspaceistimedtobenefit TempletonontheGreen. fromanticipatedmarketrecoveryand GeorgeStreet,whereScottishEnterprise forthcomingleasebreaksandexpiries, willcompletedevelopmentofa4,800sq.m. FollowingaflurryinAutumn2012atMaxim particularlyamongthecity’slarger IndustryEngagementBuilding(IEB)this OfficePark,TrilogyEurocentral,Strathclyde indigenousoccupiers.Thisnewpipelinewill summeralongsidetheUniversityof BusinessParkandSonasBraehead,the alsocontributesignificantlytoGlasgow's Strathclyde’s22,000sq.m.Technology marketoutsideofGlasgowhasbeen abilitytocompeteeffectivelyagainst andInnovationCentre(TIC).Bothalready relativelyquiet.TheMaritime&Coastguard otherUKregionalcitiestoattractmobile reporthighlevelsofoccupierinterest. AgencyhastakenasuiteatBuilding1, investmentasthemarketstrengthens. TheIEBwillprovideofficesforrenewable WestpointBusinessPark,GlasgowAirport energy,enablingtechnologyand (449sq.m.),whileKigtekSolutions Take-upoverthepastsixmonthshas collaborationwiththeUniversity. purchasedDouglasHouse,Strathclyde almostexclusivelybeenlimitedtothe BusinessPark(606sq.m.)andWaverley Totalavailabilityofofficespacewithin smallerendofthemarket,wherethere House,Hamiltonhassecuredsomesmall Glasgowhasremainedrelativestaticat isalwaysaregularchurn.Thelackof suitelettings. largerdealshasdepressedGlasgow's 377,070sq.m.city-wideor241,384sq.m. overalltake-up,whichisdownonthe withinthecitycentre.Therearesixnew ToprentsforexistingofficestockinGlasgow previoussixmonthperiodat18,713sq.m. buildingscapableofprovidinggreaterthan arewithintherange£269-£291persq.m., The12monthtake-upis45,164sq.m.,which 1,858sq.m.,fourofwhichcanprovideover withthepotentialforone-offpeaksabove isbelowthetenyearaveragebutmasks 3,716sq.m.Onlytwoofthese,Cuprumand thisonremainingGradeAspaceinthebest ahealthychurnofsmalleroffices. Capella,canprovidefloorsgreaterthan buildings.Refurbishedaccommodationcovers 929sq.m.andonlyCuprumcanprovide awiderangebetween£180-£269persq.m.

4 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 dependentonqualityandlocation.Decent Therehavebeenanumberoftransactions mostsignificantlettingsinWestEdinburgh businessparkspacecanrangefrom£120- totalling10,100sq.m.inWestEdinburgh.These forsometime.STMicroelectronicsandJLT £145persq.m.fornon-cooledaccommodation include:WSPat7LochsideView(789sq.m.); arealsorumouredtobeshortlistingoptions and£145-£193persq.m.forcomfortcooled Agilentat5/5LochsideAvenue(864sq.m.); atEdinburghPark.Completionofthetram space.Flexibleleasesalongwithsubstantial andLogicaatWallaceHouse(942sq.m.). routewillfurtherboostconnectivityforthe incentivesremainavailable. WestEdinburghofficemarket. MeanwhileinLeithtake-upoverthelast Therehasbeenlittlechangetooverall sixmonthswas4,807sq.m.withnotable AsreportedinpreviousReviews,some sentimentinthe Edinburgh officemarket transactionsto:TangibleatCommercial ofEdinburgh’sofficeoccupiersaredeciding overthelastsixmonths.AsinGlasgow,there Quay(697sq.m.);MediaComat6Dock nottorelocatebutarepreferringto isarelianceonactivityatthesmallerend Place(828sq.m.);PulsantatSugarBond agreeleaseextensionstosatisfytheir ofthemarket. (427sq.m.);NUSatTheStack,1Papermill occupationalrequirementandavoid Wynd(480sq.m.);EdinburghCollege incurringrelocationcosts. Sixmonthtake-uptoMarch2013is32,389 atTheCornExchange(743sq.m.);and sq.m.,a10%decreaseontheprevious continuedexpansionofConceptSystems Therearenonewdevelopmentsaddedto figure.Take-upoverthe12monthperiod atLogieMillRoad,BeaverbankBusiness theEdinburghofficepipeline.Atriaisnow fromApril2012is67,916sq.m.,continuing Parktakingthecompany’stotaloccupancy complete(12,981sq.m.remaining)inThe aperiodofstability. toaround1,600sq.m. Exchange,andbothEdistonProperties developmentat145MorrisonStreet(2,450 Withinthelastsixmonths,18,363sq.m.of TotalofficesupplyinEdinburghatMarch sq.m.)andFordellEstatesdevelopmentat floorspacewastransactedinEdinburghcity 2013was255,354sq.m.,adecreaseof9%. TheCharlotteSquareCollection(4,080 centrein60deals.Outsidethecitycentre, Citycentresupplystandsat152,556sq.m. sq.m.),aretocompleteoverthenext 14,026sq.m.wastransactedin33deals. withperipheralavailability102,798sq.m.,of fewmonths. GradeAtake-upovertheperiodrepresented whichGradeAavailableofficespacerepresents 11,205sq.m.,whichequatedto22%of asubstantial42%.WithinEdinburghPark Anumberofrefurbishmentshavenowalso take-upwithinthecitycentreand18% andtheGyleinWestEdinburgh,current completed,includingOrchardBraeHouse inWestEdinburgh. availabilityequatesto59,000sq.m. (Delanceyproviding6,038sq.m.)andApex 123,HaymarketTerrace(CatalystCapital Sixofficetransactionslargerthan929 Anumberofofficetransactionsare providing1,672sq.m.). sq.m.haveconcluded:SAMHatHayweight currentlyinlegalhands.AsGradeA House(1,800sq.m.);StandardLife supplyreduces,themarketwillcomeunder Thereareanumberofotherpotentialcity Investmentsat10GeorgeStreet(1,021 pressure,particularlyfrommajoroccupiers centrerefurbishmentswhichhaveyettobe sq.m.);ACHShoosmithsatSaltireCourt, withanticipatedleaseeventsbetween2013 undertakenandatpresenttheseappearto CastleTerrace(1,073sq.m.);ChequeCentre –2018.Assupplytightens,thisshould bedependentonpre-letting. atRathoPark(1,755sq.m.);Sainsbury’s translateintopre-lettingactivityatGradeA Themostsignificantsiteactivityisat BankatHastonHouse,SouthGyle(1,239 opportunitiesasoccupiersseektosecure TheHaymarketwhereTigerDevelopments sq.m.);andEdinburghNapierUniversityat theirfutureofficespace.Take-upatAtria, hasannouncedthatInterservewillbecome 36&38SouthGyleCrescent(2,415sq.m.). byGreenInvestmentBankandPwCwhich aprojectpartnerinprovidingoffice, isreportedtohaveaccommodationunder Othernotabletransactionswithinthecity hotel,retailandservicedapartments. offer,plusgoodinterestintheCharlotte centreinclude:COBANat9Charlotte Thefive-phaseHaymarketcontainsmore SquareCollectionwillfurtherrestrictlarger Square(557sq.m.);FNZandAlstomat thanhalfofEdinburghcitycentre’snew- optionswithinthecitycentre. Tanfield(totalling1,401sq.m.);Begbies buildofficedevelopmentpipeline. TraynoratEdinburghQuay2(303sq.m.); Anumberofnotableofficerequirements Meanwhile,inWaverleyValley,ArtisanReal MultreesInvestorServicesat33Castle arealsobeingdiscussedwithinWest EstateGroupisalsomakingprogressatthe Street(456sq.m.);AridhiaatHobartHouse Edinburgh.ItisunderstoodthatSainsbury’s revisedCaltongatedevelopmentwhere (836sq.m.);CairnHousingAssociationat Bankisproposingtotakethemajorityof aninitialphaseofresidentialandhotel Citypoint(743sq.m.);andPaganOsborneat theAegonofficepremisesatEdinburgh accommodationisproposed. ClarendonHouse,GeorgeStreet(836sq.m.). Park;ifconfirmedthiswouldbeoneofthe

RYDEN SCOTTISHPROPERTYREVIEWAPRIL20135 PrimeofficerentsincentralEdinburgh investmenttomaximiseoilandgasrecovery Thereisstillaseverelackofoffices remainaround£290persq.m.,however fromtheUKcontinentalshelf.This,inturn, availablewithintheWestEndofAberdeen, Atriaisquotingpeakrentsof£322per hasledtoincreasedeconomicactivityand howevertwospeculativeprojectsarenow sq.m.Therecontinuestobedownward strongdemandforoffices. onsite.JPRServicesLtdiscurrently pressureonrentsandincentivesremain developing650sq.m.at70Queen’sRoad, around36-monthsrentfreefor Officetake-upforthesixmonthperiodhas forcompletioninJune2013,andCarlton a10-yearlease.Inevitablyasprimeoffice howeverreducedsignificantlyby55%to Rockisonsiteat20Queen’sRoad stockincentralEdinburghdwindlesand 30,785sq.m.over64transactions.Thisis developingapproximately800sq.m.due newdevelopmentremainsverylimitedthere stillarelativelystrongperformanceand forcompletioninQ32013.Primeoffice willbeagradualshiftinthemarketbalance contributestoarecord12monthtake-up rentsinAberdeencitycentreremain andtheseoccupierincentiveswilldiminish. ofmorethan100,000sq.m.(thecharton at£339persq.m. page7usesannualdataandshowsthis PrimeWestEdinburghrentsremainaround risebutnottherecentdip).Morethan Withinthecitycentrenosignificant £193persq.m.forgoodqualityspace 25,000sq.m.ofofficeaccommodation progresshasbeenmadeonanyofthe withinEdinburghPark.Otherlocations currentlyunderofferisnotyetincluded developmentsites,however,itisrumoured aroundSouthGyleandinLeithachieve intake-upfigures. thatadealiscloseatTripleKirks,which £130persq.m.,fallingto£75persq.m. willpotentiallyseethe6,750sq.m. inperipheralareasaroundLeith. Supplyhasincreasedby10%to49,950 developmentbeingbuiltspeculatively. sq.m.,butunfortunatelynoneofthisis Economicactivityhasremainedstrong GradeAstockandagainalargeproportion Tothewestofthecity,demandcontinues within Aberdeen overthelastsixmonths, isunderoffer.Theincreaseinsupplyis tothriveandKnightPropertyGroup’s supportedbyasteadyoilpriceofabove largelypropertiesreleasedbyApacheand ProspectParkisnowfullylet.The $100perbarrel.Thisandincreasedfiscal Nexenduetotheirimpendingrelocations speculatively-builtPavilion3(1,750sq.m.) stabilityduetorecentannouncementsfrom tonewpremisesatPrimeFour,Kingswells. wasletpriortopracticalcompletionto theChancellorhasencouragedcapital TeekayPetrojarl,andPavilion4(2,200 sq.m.)hasbeenlettoProserveasworks commenceon-site.Infrastructureworks LargerofficedealsinScotlandoverthepastsixmonthsinclude: arenowunderwayforPhase3atArnhall Address Size Occupier BusinessParkandKnightPropertyGroup StrataHouse,CardonaldBusinessPark, 1,486sq.m. SouthsideHousing haspurchaseda2.8hectaresiteearmarked Glasgow Association forfurtherspeculativeofficedevelopment. GeorgeHouse,GeorgeSquare,Glasgow 1,387sq.m. Speirs&Jeffrey PrimeFouratKingswellshascontinuedto Capella,YorkStreet,Glasgow 1,013sq.m. CapQuest provepopularbysecuringanotherletting 150StVincentStreet,Glasgow 959sq.m. IrwinMitchell followingthreemajorannouncementslast year.ThenewlettingistoPremierOilfor SaltireCourt,CastleTerrace,Edinburgh 1,073sq.m. ACHShoosmiths a5,850sq.m.building,withworksdueto HayweightHouse,LauristonStreet, 1,800sq.m. SAMH commenceshortly.DeVereGrouphasalso Edinburgh securedasiteforavillageurbanresort RathoPark,Edinburgh 1,755sq.m. ChequeCentre tocomprisea150-bedroomfourstarhotel HastonHouse,SouthGyle,Edinburgh 1,239sq.m. Sainsbury’sBank withassociatedconferencingandleisure facilities.Inaddition,asmallerbuilding Pavilion3,ProspectPark,Westhill,Aberdeen 1,750sq.m. TeekayPetrojarl of1,400sq.m.isunderoffertoan Pavilion3,WestpointBusinessPark,Westhill, 1,150sq.m. AMEC undisclosedoccupier. Aberdeen SeafieldHouse,HillofRubislaw,Aberdeen 1,600sq.m. Chevron TothesouthofAberdeen,Phase1of CityViewonWellingtonRoadisduefor AlbaGate,Stoneywood,Aberdeen 2,600sq.m. HelixESG completioninMayandcomprises3,100sq.m. InnovationHouse,17LunaPlace,Dundee 671sq.m. SWIISFosterCareLtd acrosstwobuildings.Thelargerofthese

6 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 (1,800sq.m.)isunderoffer.AtBalmoral Recentofficesalessuggestgrowing floor;SuiteA1toOBMLtd(98sq.m.) BusinessParkaplanningapplicationhas demandforownershipopportunitiesin andSuiteB1toInfinergy(32sq.m.). beensubmittedfora3,700sq.m.building Dundee.AtCityQuay,Unit5(91sq.m.) wherethedeveloperplanstospeculatively hasbeensoldtoAimDesign,Unit16A OutwiththecitycentreatWillowHouse, buildinthesecondhalfoftheyear.At (214sq.m.)to4JStudio’s,andUnit StoneyfieldBusinessPark,Universityof AberdeenGateway,StocklandMuirnow 24(436sq.m.)toCityQuayDentalClinic. Aberdeenhastakenanassignation hasa1,850sq.m.officeunderoffertoan oftheexistingleasefromtheScottish undisclosedoccupierwithworksdueto Activitywithinthe Inverness officemarket Children’sReporterAdministration. commenceQ2/Q32013. remainssubduedandisbeingdrivenby Thesuiteextendsto120sq.m.and leaseeventsandcompaniesseekingto theleaseexpiresinDecember2013. TothenorthofAberdeen,Miller consolidatetoreducecosts.Withinthecity Developmentshassold16hectaresofD2 centre,MetropolitanHouseontheHigh BusinessParktoajointventurebetween Streetcontinuestoprovepopularwith AbstractSecuritiesandAkerASA,to recentlettingsoftwosuitesonthethird accommodateanofficeparkanchored byapre-lettoAkerSolutionsbelievedtobe inexcessof27,870sq.m.Thelatestdealto OfficeSupplyandTake-up–Glasgow beachievedatnearbyABZistoaserviced Supplysq.m.(000’s)Take-upsq.m.(000’s) officeproviderandwillcompriseastand- 400 alonebuildingof1,850sq.m.Ontheother sideoftheAirportatAlbaGate,2,600sq.m. 350 hasbeenlettoHelixESG;thecompany 300 isduetotakeoccupancyinQ42013after thecurrenttenant,Apache,movesto 250 PrimeFour,Kingswells. 200 TheAberdeenofficemarketremains 150 extremelybuoyantandalthoughthetake- upfigureshavedroppedsignificantly,this 100 isadipcausedbythespectacular performanceintheprevioussixmonths, 50 anddoesnotyetcapturethehighnumber 0 ofpropertiescurrentlyunderoffer. Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 OfficeSupplyandTake-up–Edinburgh Oneofthelargesttransactionsinthe Dundee officemarketisthelettingof Supplysq.m.(000’s)Take-upsq.m.(000’s) InnovationHouse,17LunaPlace(671sq.m.) 400 toSWIISFosterCareLtdonanew10-year 350 lease.Generallyhowever,therecontinuesto bealackoflargeroccupierrequirements 300 andthecity’sofficesectorisveryrelianton 250 smallertransactions. 200 DemandforflexibleofficespaceinDundee continuestogrow,particularlyformodern 150 suites.Thenewly-refurbishedserviced 100 officeswithinDundeeOne,RiverCourt, havesecuredsevennewtenantsinrecent 50 monthsincludingMacRoberts(46sq.m.), 0 SeaRocGroup(99sq.m.)andDCConsulting Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 (99sq.m.).Likewise,MarketgaitBusiness OfficeSupplyandTake-up–Aberdeen Centrecontinuestoprovepopularwith Supplysq.m.(000’s)Take-upsq.m.(000’s) 10lettingsduringthepastyear. 125

Workhasstartedonthenew£1.7million District10developmentatSeabraes 100 whichwillprovideflexibleoffice“pods” constructedfromrecycledshipping 75 containers. 50 OthertransactionsofnoteincludeUnit6A CityQuaytoHaysLtd(161sq.m.),Unit12 25 CityQuaytoMyHouseGroup(190sq.m.) andthe10thfloorofCityHouse,Overgate 0 toDundeeCollege(315sq.m.). Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Source:Ryden

RYDEN SCOTTISHPROPERTYREVIEWAPRIL20137 Industrial Property

Theindustrialpropertymarketis Evenageingspecialistpropertiesare largertransactionsandactivitygenerally improvingintheWestofScotland,patchy attractinginterestandtheHouseofSher confinedtoachurnofpropertiessmaller intheEastandstronginAberdeen. buildingonWallaceStreet,Tradestonwent than929sq.m. toclosingdatewithinamonthofmarketing SupplyofindustrialpropertyinWest andiscurrentlyunderoffer. Inthemediumtolargerindustrial CentralScotlandisbecominganissue propertymarketthereisasteadyflowof andthereisashortageofmodern, ThemarkethasimprovedtotheWestof requirements,butsomearecontract-driven well-configuredoptions,particularly Glasgow.Transactionsinclude Linwood andfewwillconverttoactualtake-up; withinthe Glasgow cityboundary Point(7,665sq.m.)beingsoldonaconfidential whereasatthesmallerendofthemarket anditsimmediateperiphery. basisfollowingasharpriseinbothleasehold requirementsaregenerallydrivenby andheritableoccupationalinterests. occupationalneed.Thereremainsadegree Eventhecitymarketcanbepatchy ofwindowshoppingwhereoccupiers however;Govanforexampleremains InchinnanBusinessPark hasalow withapproachingleaseeventspursue stubbornlyquietfornodiscerniblereason, vacancyrateandhasmaturedintoan alternativeoptionswithlittleintentionof despitehavingmodernstockandeasy attractivecentreforhigh-technologyand moving.Insomelocationsandparticularly accesstotheM8andcitycentre,although engineeringbusinesses.Largeoccupiers forproductoflessthan1,858sq.m., take-uphereisexpectedtoimprove. suchasRollsRoyce,LifeSciences,Wartsila landlordsmaysoonbeinapositiontocall Meanwhile,SouthStreet/Whiteinchacross andVascutekactasadrawforsuppliers theirtenant'sbluff.Fewertenancieswillbe theRiverClydehasexperiencedadistinct andsmallerbusinessesandtheclose allowedtocontinueontacitrelocation. improvementinitsfortunes. proximitytotheairportisabonus.The mostrecentlettinginvolvesaunitat Oneexceptiontothequietdevelopment Primeestatesareexperiencinghighlevels MaritimeCourt(418sq.m.)whichhasbeen marketisClydeGatewayEast,ajointventure ofoccupancyandinsomeinstancesare takenbyVolkerVesselsat£64.50persq.m.; betweenMEPC,SCOTSheridanandClyde fullylet.ForexampleCEG'sholdingat thelandlordhadachoiceofoccupierswith GatewayURC.Thispopularnewbusiness Thornliebankisfullylet,Stockbourne's threeseriousinterestscompetingforthe locationistheonlysignificantnew-build AnnickIndustrialEstateisapproaching space.Inaddition,1,858sq.m.hasbeen schemewithintheGlasgowcityboundary. fullcapacityandMEPC'sHillingtonPark takenbyProfessionalBeautySystems. Thefirstphaseofthreebuildingssawthe continuestohaveveryhighoccupancy. Renfrew’sWestwayhascontinuedtoattract largestunit(2,062sq.m.)takenasapre-let TotheEast,GlasgowBusinessParkhas goodlevelsofinterest,particularlyfrom byGlacierEnergyServicesat£66persq.m. securedfurtherlettingsandtheTradePark engineeringbusinessesincludinganew andthesmallestunit(1,495sq.m.)purchased is85%fullwithtwo464sq.m.unitsleft lettingtoClydeCorrosionLimited shortlythereafterbyPFCusackat£775 followinglettingstoHireStation(558sq.m. (3,716sq.m.)at£21.50persq.m. persq.m.Asecond6,990sq.m.phaseis at£73persq.m.)andGlasgowMOTStation currentlyatplanningapplicationstageand Limited(279sq.m.at£75persq.m.). Otheroutlyingareasarebeginningtoshow isattractingpre-letinterest. However,thedevelopmentmarketis improvement.In Cumbernauld and East showingrelativelylittlesignofreaction Kilbride however,thesheervolumeof Elsewhere,industrialspacewillbecreated particularlyintheproductionofsmaller industrialfloorspacewithintheseformer throughtheconversionandrefurbishment unitswithintheGlasgowboundary.Funding NewTownshassuppressedrentallevels ofexistingstock.AnexampleisZephyr fordevelopmentremainsachallenge. andcreatedamoretenant-friendlymarket Developments’alterationofaformer withshort,flexibleleasesandenhanced engineeringpropertyatMontroseAvenue, Thereisalsoanincreasedappetitefor incentivesremainingcommon.Within Hillingtonwherethedeveloperissplitting heritableinterests.Aunitat50Marlow Cumbernauld,largerindustrialproductis thespaceinto18smallerunitsforleaseor Street,Glasgowwasplacedunderoffer securinginterestonceagainandanumber sale.Sevendealsareinlegalhandsandthe aftertwoweeksofmarketingandattracted ofbuildingsareunderoffer.However, developmentisscheduledtocomplete stronginterestfromoccupiersand transactionsaregenerallyonshorterterm atthebeginningofMay.Anotherexample investors.Ahighly-specifiedunitat leasesandatadiscounttorentallevels isHarrisFinance’spurchaseof870South FiftyPitchesRoad(1,340sq.m.)wentto pre-2008,whilecapitalvalueshavealso Street(1,440sq.m.);theunitwasina closingdateandsoldfor£810,000after fallen.The Ayrshire and Inverclyde dilapidatedstateandfollowingextensive anumberofbidsweresubmitted. marketsremainchallengingwithfew refurbishmentisofferedat£48persq.m.

8 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 InNorthLanarkshiretheprovisionofnew LargerindustrialdealsinScotlandoverthepastsixmonthsinclude: industrialproductisbeingdrivenbyMuse Address Size Occupier Developmentsat Eurocentral andby FusionAssetswithjointventurepartners. Apexbuilding,Eurocentral 6,689sq.m. Stapleton’sTyreServices Limited Eurocentral’smostrecentdealistheletting ofApex(6,689sq.m.)toStapleton’sTyre MaritimeCourt,InchinnanBusinessPark, 1,858sq.m. ProfessionalBeauty Inchinnan Systems ServicesLimitedat£63persq.m.Positive interestintheremainingspaceis GlasgowTradePark,GlasgowBusinessPark, 558sq.m. HireStation Glasgow promptingconsiderationofafurtherphase ofdevelopmentonPlotI.FusionAssetsis 123JohnstoneAvenue, 2,322sq.m. JGRussell HillingtonIndustrialEstate,Glasgow pursuingmultiplesiteswiththeaimof providingsmalltomediumsizedproduct: QueenAnneDrive,Newbridge 2,578sq.m. MurrayAndersonHomes DundyvanEnterpriseParkisonsiteand isajointventurewithCBCandwillprovide PyramidsBusinessPark,Bathgate 5,500sq.m. CLS 4,050sq.m;theprojectisthefirstin ScotlandtohavesecuredSprucesupport SimpsonRoad,EastMains 1,357sq.m. BroxburnBottlers (aScottishGovernment/European IndustrialEstate,Broxburn InvestmentBankfundmanagedbyAmber Units1/2,AltensTradeCentre,Altens 1,943sq.m. FranksInternational Infrastructure)andapre-salewasagreed. +yard FurtherdevelopmentisplannedbyFusion Unit3&4,AltensTradeCentre,Altens 1,633sq.m. FranksInternational AssetsatEurocentral,Dunalastair, +yard Cumbernauld,DrumpellierBusinessPark UnitA,CraigshawRoad,Tullos 1,338sq.m. StepOilToolsLtd andStrathclydeBusinessPark. +yard 77WellingtonStreet,Aberdeen 1,137sq.m. G.O.T Theindustrialoccupiermarketin East +yard CentralScotland hascontinuedtobe Unit6,119ClepingtonRoad,Dundee 1,271sq.m. HighlandIndustrial patchyasreportedinOctoberlastyear. SuppliesLtd Vacancyrateshavecontinuedtoriseas 16CarsegateRoadNorth, 1,429sq.m. CaledonianLogisticsLtd occupierdemandhasfailedtoreturn CarseIndustrialEstate,Inverness inconsistentandsustainedfashion, whichinturnisputtingdownwardpressure whereYESSSElectricaltookaround450 TalonRopeAccessEdinburghand onrentallevelsandupwardpressureon sq.m.at£58persq.m. EdinburghHotTubs. tenantincentives. In EastLothian ,D&GAutocarecontinued In WestLothian ,somelargerscalelettings Within Edinburgh ,lettingactivityhasbeen theirexpansionprogrammebyacquiring havetakenplace.AtPyramidsBusiness seenatSouthGyleIndustrialEstate(for aunitfromSharkeyatNewhailesIndustrial Park,CLShastaken5,500sq.m. AberdeenAssetManagement)at£75per Estate,Musselburgh(615sq.m.)at at£29.60persq.m.InBroxburn,Eastern sq.m.andalsoforCityofEdinburghCouncil £54persq.m. Holdingshaslet1,357sq.m.atSimpson ontheirPeffermillIndustrialEstateat£78 Road,EastMainsIndustrialEstateto persq.m.,albeitforsmallerunitsof102sq.m. SouthoftheCity,in Midlothian ,the BroxburnBottlersat£32persq.m.The successofBilstonGlenIndustrialEstate areatookasevereblow,however,when InthewestoftheCity,Hansteensecured continuedandarangeoflettingshave approx1,700jobswerelostduetothe twonewlettingsinthelastsixmonths takenplaceinthelastsixmonths. closureoftheHall’sofBroxburnmeat atQueenAnneDrive,NewbridgetoSoltens LettingshavebeensecuredtoYESSS productionfacility.Inresponsetothis andMurrayAndersonHomes(2,578sq.m. Electrical(464sq.m.)withintheJSmart& closure,theScottishGovernmentand each)atapprox£30persq.m. Codevelopmentatarentof£70persq.m. WestLothianCouncilhaveannounced Landlord,Sharkey,nowhasfulloccupation thecreationofEnterpriseareastatuson InLeith,oneoffewrecenttradecounter onDrydenRoadwiththreeothernew threesitesatEastMainsIndustrialEstate lettingstookplaceat27TenantStreet tenants-TopOutBrewery,

RYDEN SCOTTISHPROPERTYREVIEWAPRIL20139 andafurthersiteatEliburn,Livingston. industrialmarket.Take-upinthelastsix Onceagain,theincentivesbeingofferedto Assistancewillbeavailabletooccupiers monthstotals24,304sq.m.,a40% ingoingtenantsareminimalandanumber locatingtothesesitesandwillinclude decreaseontheprevioussixmonths. ofpropertieshavegoneunderofferwithin businessratesrelief,enhancedcapital Howeverthisdoesnotactuallyreflect averyshortmarketingperiod.Average allowancesandstreamlinedplanning. themarket,asasignificantportionof leaselengthsremainat5to10years thesupplyispresentlyunderofferand forsecondarystockandaminimumof SmallerdealsinWestLothianunder1,000 willbereflectedinthenextReview. 15yearsfornewbuild/speculatively-built sq.m.includethelettingsofUnit3Drummond industrialspace. SquaretoSpringEngineeringandUnit7 The49transactionsduringthelastsix RutherfordSquare,BrucefieldIndustry monthsisidenticaltotheprevioussix Anumberofdevelopersundertaking Park,Livingston,forthelandlordF&CReit, months.Take-upishoweverhigherinthe speculativeindustrialdevelopmentacross bothat£48persq.m.Inaddition,Cheshire smallersizeranges:0–464sq.m.(21%) Aberdeenareexperiencingstrongoccupier CountyCouncilPFhassecuredtheletting and465–929sq.m.(41%)butlowerinthe interestpriortocompletion.Thisincludes ofaunitatEldonSquare,Houstoun largersizeranges:930–1,858sq.m.(-35%) ABZBusinessParkinDyce,Buccleuch/ IndustrialEstate,LivingstontoYESSS and1,859sq.m.+(-89%).Thiscanbe ScottishEnterpriseatAberdeenEnergy Electricalatarentof£48persq.m. explainedbyalackofgoodqualitystock. &InnovationParks,GilcomstonInvestments Staffretentionandcorporateimageare atRaithsIndustrialEstateinDyceand Landlordsin Fife arebenefitingfrom majorissuesforthevastmajorityofoiland DandarainWesthill.Substantialindustrial anincreaseindemandresultingfrom gasoccupiers,whichiswhythemarketfor design-and-builddealsareunderofferat theconstructionofthenewForthCrossing, moredatedpremisesinthecityis presentandannouncementsareexpected andfromtheenergysector.Hermeshas struggling. shortly.Theslowtake-upexperiencedover leasedtwounitsonBelleknowesIndustrial thelastsixmonthsisonlytemporary. SupplyofindustrialspaceinAberdeenover Estate,InverkeithingtoSGMandWeb thelastsixmonthshasrisenby4.7%from Theavailabilityofdevelopmentlandin RiggingServicesLtdat£53persq.m. 78,400sq.m.to82,075sq.m.Alarge Aberdeenhassubstantiallyincreased; Itisalsoreportedthattheformer numberofsubstantialindustrialpremises approximately182–202hectaresof Co-opdistributionfacilityinDunfermline cametothemarketinrecentweeksasis employmentlandisactivelybeing (24,154sq.m.on10hectares)isnow demonstratedbythesupplyinthe1,859 marketedacrossthecity.ABZ beingconsideredbytwopotential sq.m.andabovesizerangerisingoverthe Developments,BalmoralGroupandChap owner-occupiers. lastsixmonthsby27%.Supplyhas (Silvertrees)haveundertakenextensive Developmentactivityacrosstheregion decreasedinallothersizeranges. siteservicingsothatthesitesareripe alsoremainslimited,althoughsome Asignificantportionofthissupplyis fordevelopment.MillerDevelopments positivesignsareemerging.For underoffersothefiguresaredistorted. andGenerateLand/Mountgrangehave launchedD2BusinessParkinDyceand example,atNewbridge,EdinburghRoxhill Therelativeshortageofsupplywithin TheCoreatBridgeofDonrespectively. Developmentshaspurchasedapprox Aberdeen’sestablishedindustrialestates 4.85hectaresofserviceddevelopment hasledtoanumberofoccupiers The Dundee industrialmarketisshowing land.Noplanstodevelopspeculatively consideringlocationsontheperipheryof signsofincreasingactivity,however havebeenannounced,however,interestis Aberdeen,forexampleAscoandPetrofac achievablerentshavedeclinedand alreadyreportedinpotentialpre-lets.In havetakensubstantialpremisesinKintore; landlordsarepreparedtooffergreater WestEdinburgh,C&WAssetsissetto HBRentalshasrelocatedfromDyceto incentivestoattractnewtenants. continuetheirspeculativedevelopment Strichen;andbothAdvantecandtheElliot programmewithadevelopmentof2,440 Grouphavecommittedtopremiseswithin RecentdealsincludethelettingofUnit3 sq.m.(Phase1)ontheformerPentadsite KirkwoodCommercialParkinInverurie. KingsCrossTradePark(464sq.m.)to whichhasbeenacquiredonagroundlease YESSSElectrical,Units1A&1BDunsinane fromtheCityofEdinburghCouncil. Rentallevelsarerisingforbothsecondary Park(929sq.m.)toHancocksCash&Carry, andnew-buildindustrialstock.Itis Unit6,119ClepingtonRoad(1,271sq.m.)to Aswiththeofficesector,thebuoyancy anticipatedthatnew-buildrentswillrise HighlandIndustrialSuppliesLtd,14Nobel oftheNorthSeaoilandgasindustry to£97persq.m.forwarehousespaceand Road(771sq.m.)toDD2(Catering)Ltd,and hasfuelledstrongdemandin Aberdeen’s £194persq.m.forassociatedofficespace 42PerrrieStreet(412sq.m.)toAspect inthenextfewmonths. ContractsLtd.

10 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 IndustrialSupplyandTake-up–GlasgowandClydeValley

Supplysq.m.(000’s)Take-upsq.m.(000’s)

1800

1600

1400

1200

1000

800

600

400

200

0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 AwarehouseandofficeatFowlerRoad, WestPitkerro(3,024sq.m.)hasbeensold toMayfairCapitalInvestmentManagement IndustrialSupplyandTake-up–SouthEastScotland whileBlock24DunsinaneIndustrialEstate Supplysq.m.(000’s)Take-upsq.m.(000’s) (3,692sq.m.)andtheformerMcTavish 1000 RamsaypremisesatFowlerRoad,West 900 Pitkerro(3,180sq.m.)havebeensold 800 toowner-occupiers. 700 ThelargesttransactioninDundeewasthe 600 saleoftheformerPatak’sfactoryatPearce 500 Avenue,WestPitkerroIndustrialEstate 400 (3,490sq.m.)toUnibev,whowilloccupy 300 partandrefurbishandsub-dividethe 200 remaindertoprovidesmallerindustrial 100 accommodation. 0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Theindustrialmarketin Inverness remains activeandcontinuestobedrivenby amixtureofdistribution,tradecounter IndustrialSupplyandTake-up–AberdeenCityandShire andservicebusinesses. Supplysq.m.(000’s)Take-upsq.m.(000’s) Thelargestrecenttransactionistheletting 200 ofSite2,Bridgepoint,LongmanDriveto 180 BEARScotlandtoservicetheNorthWest 160 trunkroadscontract.Thesiteextendsto 140 0.6hectaresandincorporatesawarehouse 120 (957sq.m.)anddetachedofficebuilding 100 (307sq.m.).UnitA,54-56HarbourRoad 80 (361sq.m.)hasbeenlettoAutoglassona 60 new10-yearleaseat£88persq.m.Thisis 40 understoodtobethehighestindustrialrent 20 achievedinrecenttimesontheLongman 0 IndustrialEstate.ARKEstateshasrecently Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 letadistributionwarehouseat16Carsegate RoadNorth,CarseIndustrialEstate(1,429 sq.m.ona0.4hectaresite)toCaledonian IndustrialSupplyandTake-up–Tayside Logistics. Supplysq.m.(000’s)Take-upsq.m.(000’s) OutwithInverness,Diageohasannounced 220 plansforanew£50millionmaltwhisky 200 distilleryatTeaninichDistillery,Alnessin 180 EasterRoss.AtInvergordon,CromartyFirth 160 PortAuthorityisprogressingasignificant 140 120 expansionoftheportfacilitiesto 100 accommodateincreasedworkloadfromthe 80 oilandgasandrenewableenergysectors. 60 Therehasalsobeenincreasedactivityat 40 theformerfabricationyardatNiggas 20 GlobalEnergyGroupcontinuestodevelop 0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 thisfacilitytoservicetheenergysector. Source:CoStar

RYDEN SCOTTISHPROPERTYREVIEWAPRIL201311 Retail Property

AccordingtotheScottishRetail Espressionexpandingtheircoffeeconcept StAndrews hasseenanewletting Consortium/KPMG,retailsales,despite withatargetof400shopsintheUKby at133MarketStreet(367sq.m.)to fragiletradingconditions,increasedby 2023,andRSMcCollplanningafurther150 Paperchasewithinthespaceformerly 1.8%overthe12monthstoMarch2013. conveniencestoresoverthenexttwoyears. occupierbyClintons,whileawaitingthe Like-for-likesalesalsoincreasedby0.9%. outcomeofaplanningapplicationfora However,growthinfoodsalesof5.2% Thelatestnewsfrom Glasgow ,theUK’s Marks&SpencerSimplyFoodandPremier masksa-1.9%declineinnon-foodsales. secondmostpopularretaildestination InndevelopmentonLargoRoad. afterLondon,isLandSecurities’opening Thestartof2013witnessedthedemiseof ofthe£70millionBuchananQuarterin Stirling haswelcomedtheopeningof majorretailersComet,Blockbusterand March2013.Thenewdevelopmentincludes Waitrose,TKMaxxandMaplinwithin Jessops.Theseretailerswerefollowedby Forever21witha5,575sq.m.store, the5,574sq.m.BurghmuirRetailPark, Dreamswhohaveattractedtheinterestof alongsidePaperchase,Vans,Gap,Office, adevelopmentbyStirlingDevelopment SunCapitalPartnersinsavingthemajority EvansCycles,SketchersandWatches AgencyandValad. ofstores,whileclosinganumber ofSwitzerland.LandSecuritiesisalso ofunsuccessfulbranches,andHMVwhich expectedtoannounceitsextension Aberdeen remainsthedominantforce hasbeensoldtoHilco,saving141stores. tothe60,000sq.m.BuchananGalleries. intheNorthasthelocaleconomyforges aheadduetotheongoingprosperitywithin Themostactiveretailsub-sectoristhe TheBuchananQuarteropeningcoincided theoilandgasrelatedindustries.Thishas conveniencestoremarketasthebigfour withthenewsthatIvanhoeCambridge, ralliedoccupierinterestwithinthecity foodretailersjostleforposition.Thereare owneroftheStEnochShoppingCentre, centreandthenow-establishedUnion around49,000conveniencestoresinthe hasplacedthecentreonthemarketwitha SquareShoppingCentrehaslimitedoptions UK,butbrandedgrocerychainsaccountfor pricethoughttobeintheorderof£180 availabletoprospectivetenants.Thelatest littlemorethan10%.Thishasnotbeenlost million.IvanhoeCambridgeboughtthe additiontothecentreisCosmoRestaurants. onTesco,Co-op,orSainsbury’sandhas CentreinFebruary2005andhasheavily recentlycapturedtheimaginationofMorrisons investedinextensionandrefurbishment Theretaillandscapeof Edinburgh isdueto forthe‘MStore’conceptwhichseeks300 overtheperiod. improveasthetramworksdrawtoaclose outletstocomplementtheirsupermarkets, inthesummerof2013andreturnthe includingacquiring49Blockbusterstores CapitalShoppingCentreshasunveiled streetstotheshoppers.Thiswillbe andsevenformerJessopsunits. planstoredevelopits Braehead Shopping welcomenewstotheoccupierswithinthe CentreontheoutskirtsofGlasgow.Itis citycentre,especiallythoseonPrinces Attheoppositeendoftheconvenience likelytobeextendedbyafurther40,880 StreetandShandwickPlacewhohave storesectoritisclearthattheracefor sq.m.atacostof£200millionandinclude sufferedmost.Anewdevelopmentat11-15 spacebymajorsuperstoresisfinally anewiceskatingarena,sportsfacilities PrincesStreetiswellunderwayandisto waning,aspredictedintheApril2012 anda200-bedroomhotel. includeMotelOne'ssecondhotelinthe Review.Interestinsuchsitesisnow cityandaflagshipstoreforApple. highlyselectiveandretailersarenow TheAntonineShoppingCentrein concentratingmoreoneffectiveuseof Cumbernauld hassecuredfurtherlettings PrincesMallisintheprocessofrelocating existingstores,multi-channelsalesand toCarphoneWarehouse,CardFactory, itsfoodcourttoallowforSainsbury’sLocal smalllocaloutletsasmentionedabove. StEnochNewsandCostaCoffeewhohas tobeincludedwithinthecentre.Thiswill Thereisstillselectivedemandforlarge securedtheirsecondoutletinthecentre. beanattractiveadditiontothemalland stores,buttypicallynow4,000-6,000 furtherenhancetheSainsbury’soffer AmajorredevelopmentbytheUniversities sq.m.ratherthanupto10,000sq.m. withinthecitybyaddingtotheirRose SuperannuationScheme(USS)ofthe Streetstoreandtherecently-openedstore Goodnewsincludestherecentpurchase StJohn’sShoppingCentrein Perth intheformerHabitatsiteonShandwick ofRepublicbySportsDirect,whichhopes isunderway.Twonewflagshipstoresfor Place.ElsewhereonPrincesStreet, tosecuretheRepublicbrandandtheir116 H&M(1,579sq.m.)andRiverIsland(929 ClarksisopeningintheformerBarratts stores.Otherexpandingretailersinclude sq.m.)willbecreatedalongwiththree Shoesatnumber81,andKanooTravelhas Ladbrokesseekingafurther100stores refurbishedretailunits. movedintotheformerLushpremisesat withinthenext12months,Lavazza number44.

12 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 FatFaceisrelocatingfromRoseStreetinto RetailIndex&CPI theformerAmericanExpress/KanooTravel unitonGeorgeStreet. 150 RetailIndexCPI

EastKilbride towncentrehasshown thatthereisfurtheractivitytoback-up itsTopshop(1,000sq.m.)lettingandhas followedupwithmajorlettingstoH&M

(2,090sq.m.),JDSports(813sq.m.)and 100 BANKFashion(604sq.m.)togetherwith furtherlettingstoCostaCoffee,Clintons, PaddyPower,ThomsonandBHF.The landlordhasannouncedthat3,720sq.m. offloorspaceiscurrentlyunderoffer, comprisingthreelargestorelettings 50 andafurthersixunitshoplettings.

RedevelopmentworkisunderwayatStack LeisureParkin Dundee whereTJMorris, theoperatorofdiscountretailerHome Bargains,istoopenastore(2,275sq.m.). 0 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Achangeofuseapplicationhasalsobeen submittedfortheadjoiningunittopermit Source:ONS/Ryden Class1Retailusesuitableforthesaleof foodandnegotiationsarebelievedto marketremainsactivewiththeCo-op to£80persq.ft.ZoneA.Thisisthecity’s beatanadvancedstagewithanational recentlyagreeingtermsfortwonew-build secondrentalfallinarowwithintheindex. supermarketchainforapproximately conveniencestores,oneatMiltonofLeys 1,720sq.m.Thenew£24millionAsda andonetoserviceWesterInshes.Dobbies Therentalchartnowclearlyillustrates superstore(4,830sq.m.)onthesiteofthe hasconfirmedplanstoopenanewgarden theweakeningoftheretailoccupational formerNCRmanufacturingunitatWester centreatInshesRetailParkadjoiningthe marketsincethe2008crash,particularly Gourdieisexpectedtoopensummer2013. existingTescostore. whenplacedinrealtermsagainst Inthecitycentre,TheWellgateCentrehas consumerpriceinflation. seenstoreopeningsbyLeadingLabels(632 Theretaildevelopmentsectorismovingin sq.m.),BrightHouse(336sq.m.),Pavers ever-decreasingcirclesasretailersfocuson Shoes(474sq.m.)andBearsandBuddies topprimelocations.Scottishtownswhich Workshop(94sq.m.). attractednewshoppingcentresinprevious marketcyclesarenolongeronthe“prime” Secondaryretaillocationswithin Inverness list,andactivedevelopmentisfirmly continuetostruggle.Wellknownretailers, focusedonselectedlocations,particularly includingDEShoesandJessops,have Glasgowcitycentreanditshaloofmodern recentlygoneintoadministrationandtheir shoppingdestinationsatBraehead, formerunitsonAcademyStreetandthe SilverburnandGlasgowFort.Development HighStreetarenowonthemarket.Within beyonddestinationcentreslooksunlikey theEastgateShoppingCentre,Superdry fortheforeseablefuture. hasrecentlytakenontheformerPeacocks store(774sq.m.)andLadbrokeshastaken TheRydenretailrentindexcontinues newretailunitsonChurchStreet(83 toexperiencelatentdownwardpressure, sq.m.),InglisStreet(444sq.m.)andGrant althoughtheonlycentretorecordan Street.Out-of-towntheconveniencefood actualfallsinceOctober2012isInverness,

RYDEN SCOTTISHPROPERTYREVIEWAPRIL201313 Investment Market

TransactionalactivitywithintheScottish Officepropertyinvestmentdealsinclude: propertyinvestmentmarketoverthepast Address Property Purchaser sixmonthshascontinuedtobepatchy. Thefocusisuponparticularsub-sectors, 100BothwellStreet, 9,506sq.m.lettoStudentLoans SplendorLtdfor forexamplepre-letdevelopmentfundings, Glasgow CompanyonFRItermsexpiring2023 £16.79million(9.5%) withtenantbreakoption2018 officeandindustrialtransactionsin Aberdeenanddistressedsecondary MercantileChambers, 6,652sq.m.multi-letofficeand HendersonGlobal assetsales. 53BothwellStreet, retailbuilding.Tenantsinclude Investorsfor Glasgow Sainsbury's,PretAManger £5.25million Withincomeof6.4%counteredbynegative andSecretaryofState (c.10.5%) capitalandrentalvaluegrowth,thetotal PortlandHouse,Renfield 3,421sq.m.multi-letofficeandretail PrivateInvestorfor returnfromScottishproperty Street,Glasgow building.TenantsincludeTescoandQA £2.551million(12.3%) in2012was0%whichcomparesless KintailHouse,Hamilton 3,837sq.m.lettoBabcockonFRIterms HenleyProperty thanfavourablywithUKAllProperty BusinessPark,Hamilton withc.9.5yearsunexpiredwithannual Investmentsfor performanceat2.7%(IPD).TheScottish 1.5%parentalincreases £5.65million(11.5%) officeandretailsectorshave Waverleygate,Waterloo 20,160sq.m.multi-letofficebuilding. PRUPIMfor£46 underperformedtheUKaverage,however Place,Edinburgh TenantsincludeAmazon,Creative million(7.3%) Scottishindustrials,withatotalreturnof Scotland,MicrosoftandtheNational 3.3%,outperformedUKindustrials’2.9%. HealthServiceScotland Theout-performanceinthissectorcould TheEagleBuilding,Rose 1,810sq.m.multi-letofficeandretail KamesCapitalfor bedueinparttothefactthatindustrial Street,Edinburgh building.TenantsincludeBright £4.75million(9.08%) propertiesinScotlandstillenjoythebenefit PurpleResourcing,Nevisport andGreggs offullvacantratesrelief. NewTelecomHouse, 1970’sofficebuildingtotalling FOREPartnershipfor Onceagainthemostnotable CollegeStreet,Aberdeen 7,214sq.m.lettoBT £9.25million(9.25%) underperformanceisintheofficesector NorthEsplanadeWest, New3,716sq.m.HQofficebuilding Tritaxfor£16.10 withatotalreturnof-0.6%,which Aberdeen lettoGDFSUEZE&PUKLtd million(7.25%)ona comparestotheUKat4.1%.Performance forwardfundingbasis wouldundoubtedlybeweakerandthe Pavilion3,Westpoint 1,161sq.m.officelettoAMEC PrivateInvestorfor disparitygreaterhaditnotbeenforthe BusinessPark,Westhill £3.60million(7.45%) out-performanceoftheAberdeen officesector. 56CardenPlace,Aberdeen 641sq.m.officeletClydesdaleBank PrivateInvestorfor £3.40million(5.91%) Therearesignsintheearlypartof2013 thatinvestorsentimentfortheEdinburgh Theavailabilityofbankdebtfornew InAberdeentheabsenceofimmediately andGlasgowofficesectorsisimproving. transactionscontinuestobeconstrained, availablespeculativeofficesupply Steady(ifunspectacular)take-upalliedto particularlyinthedevelopmentsector. continuestopushactivitytowardpre-let diminishingsupplyandlimiteddevelopment developments,especiallyinthebusiness iscombiningtopersuadeinvestorstoconsider Office parksectorwheresitesareeasierto bothletandspeculativeopportunities. AstheAberdeenmarketcontinuestosurge secure.Additionally,investorsarefocusing Thismaybethestartofaslowrecovery. forward,therearefinallywelcomesignsof onexistingbuildingswithactivelease Withdemandforsecondaryassetslimited, lifebeginningtoreturntotheEdinburgh managementorrefurbishmentand bankshavecontinuedtopursueastrategy andGlasgowcitycentremarkets.Itremains re-lettingangles. ofde-leveragingbywayofloanportfolio earlydays,howeverthesentimentthat InJanuaryTritaxconcludeda£16.1million sales.Thisprocessisintroducing regionalofficecentresoutsideoftheM25 purchaseofMillerCromdale’sHQoffice anumberofnewparticipantsintothe canalsoofferattractiveopportunitiesfor developmentforGDFSUEZE&PUKLtdat Scottishpropertymarket.Incertain theinformedinvestorisapositivestep NorthEsplanadeWest,Aberdeen. instancesitprovidesanopportunityto forwardfromthemoribundrecentmarket. rebasevalues.

14 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 Thiswasthefirstforward-fundingtobe thecontrastintheirrespectivefortunes. Onceagainthemostactivepurchasersof completedinAberdeenforseveralyears. Forthethreeyearperiodfrom2009-2011, industrialinvestmentpropertiesinthelast Constructionhasnowcommencedand AberdeenofficespostedTotalReturnsof sixmonthshavebeeninstitutionsandhigh completionoftheGradeAbuildingis 10.1%pa,whileEdinburghandGlasgow’s networthprivateinvestorswithsubstantial scheduledforQ12014.Thepricereflects were2.8%paand5.2%parespectively. cashreservestoacquirestockwithlittleor anapproximateinitialyieldof7.25%. nobankdebt.Encouraginglyhowever,some Elsewhere,thesaleof56CardenPlace Inthebusinessparkmarketinthecentral acquisitionshavecompletedwithdebt toalocalinvestorwasthecity’sfirstsale belttherearetentativesignsofactivity, fundingtoo. atasub-6%yieldsincethe2008 butstillatcapitalvaluesshowing propertycrash. significantdiscountstobuildcostandalso Investordemandremainsstrongestfor toperceivedowner-occupiersalevalues. Aberdeenwheretheoccupationalmarket IntheEdinburghandGlasgowoffice Thecommencementofthehighervacant continuestooutperformGlasgowand marketsthereisagrowingrealisation non-domesticratesliabilityisasignificant Edinburgh.TheAberdeenmicroeconomy thatthecautiousimprovementsinthe burdenonpricingofvoidorshortterm isstillbuoyantandinvestorsareunlikely occupationalmarketscoupledwiththe incomeinthissector. tosufferlongvoidperiodsasaconsequence. scarcityofnew-buildGradeAstockwill Speculativeindustrialdevelopmentisnot presentgrowthopportunities.Thishas Industrial widespreadbutdoesexist.Thestrong encouragedsomeselectivebuyingin InvestmentactivitywithintheScottish fundamentalsofferedbythecitymake bothcities.Primeofficeyieldsremainat industrialpropertymarketremainsweak itanobvioustargetformany. c.6.25%althoughthedefinitionofwhat duetocontinuedeconomicconcernsand constitutesprimeistightlydrawn. limitedbankfinance.

InEdinburgh,PRUPIMacquiredWaverleygate for£46million,reflectinganinitialyield Industrialpropertyinvestmentdealsinclude: of7.3%.Otherdealsinlawyers’hands confirmthecurrentpreferenceformulti-let Address Property Purchaser investmentsoversingleoccupancies– KingstonBridgeTrading 11,352sq.m.multi-letindustrial/trade Cornerstonefor unlesstheunexpiredleasetermorpricing Estate,Glasgow estate.Majorityofincomesecuredto £8.745million(8%) nationaltenantcovenants provideadequatesecurity. LondonRoadTradePark, 2,053sq.m.modernmulti-lettrade PrivateInvestorfor InGlasgowthissituationwasconfirmedby Glasgow park.TenantsincludeICIDulux, £1.69million(8.7%) thesaleof100BothwellStreet,whereasix HowdensJoineryandWürth yeartermcertaintoasingle(Government) 51McNeilDrive, 4,845sq.m.singleletmodern F&Cfor£2.92million occupierpushedtheyieldouttoabove9% Eurocentral distributionunitlettoFedExUK (8.25%) forarefurbishedbuildingoccupyinga onFRItermsexpiringDec2022 primelocation. NewbridgeOne,Cliftonhall 3,918sq.m.modernestate,withunits CBREGlobalInvestors Road,Newbridge lettoScottishMinisters,perthe for£2.56million(9.95%) PRUPIMhasbeenactiveinGlasgowwith ScottishAmbulanceServiceBoard thespeculativefundingoftheMountgrange andDietChef schemeontheformerOdeoncinemasite 22StMacharRoad, 1,262sq.m.refurbishedindustrial PrivateInvestorfor at1WestRegentStreetmakingthemthe Aberdeen unitlettoEuroCarParts £1.025million(7.83%) trailblazerinthissectorofthemarket. GreenroleTradingEstate, 3,954sq.m.multi-letindustrialestate NewParkCommercial Kirkhill,Aberdeen for£2.73million(11.92%) AccordingtoIPD,Scottishofficesprovided negativeTotalReturnsof-0.6%forthe12 CairnFacility,HoweMoss 4,042sq.m.industrialandoffice PrivateInvestorfor monthstoDecember2012,mainlydueto Avenue,Kirkhill,Aberdeen facility £4.45million(8.1%) negativecapitalgrowthof-6.9%.Analysing DenmoreIndustrialEstate Twomulti-letindustrialestates Threadneedle thecomparisonbetweenAberdeenandthe andWellheadsIndustrial totalling10,300sq.m. Investmentsfor Estate,Aberdeen £9.83million(8.95%) othertwocitiesinmoredetailhighlights

RYDEN SCOTTISHPROPERTYREVIEWAPRIL201315 TheheadlinetransactioninAberdeenwas Retailpropertyinvestmentdealsinclude: Ashtenne’soff-marketsaleoftwomulti-let Address Property Purchaser 1980’sterracedestatesatDenmore andWellheadsindustrialestatesto 132ArgyleStreet 1,223sq.m.primecornerretailand CordeaSavillsfor ThreadneedleInvestmentsfor£9.83million, &2BuchananStreet, officeblock.Basement,groundand £10.45million(5.45%) Glasgow firstfloorslettoHSBConFRIterms reflectinganetinitialyieldof8.95%. expiringJune2025.Threevacant upperfloorsofoffices ThemostnotabletransactioninGlasgow 135-147AyrRoad, 1,670sq.m.modernsupermarketletto CBREGlobalInvestorsfor wasthemulti-letsaleoftheKingston Prestwick Co-opwithc.63yearsunexpiredon £2.539million(6.33%) BridgeTradingEstate,whichwasacquired thehead-lease.Sub-lettoAldiwithc. byCornerstonefor£8.745million, 15yearsuntilsub-leaseexpiry reflectinganetinitialyieldof8%. Unit1,StMungo'sRetail 3,285sq.m.retailwarehouseletto PrivateInvestorfor Park,Cumbernauld B&MRetailLtdonFRItermsexpiring £2.05million(10.37%) SalesinEdinburghwereatthelowerend September2020 ofthelotsizespectrum.Anexampleofthis wasCBREGlobalInvestorsacquisitionof WestsidePlazaShopping 17,650sq.m.suburbancentre LIMfor£8.5million(13%) Centre,Westerhailes, anchoredbyLidl,OdeonCinemaand themulti-letNewbridgeOneIndustrialPark Edinburgh GalaBingo tothewestofthecity.Thepriceof£2.56 millionreflectedanetinitialyieldof9.95%. DemandforhighstreetretailinAberdeen Thedefinitionofprimeislikelytoremain hasbeensubdued,withnosignificant narrow,howeverweightofmoneyallied Thereisevidenceofyieldssoftening transactionstoreport.Withbetter toscarcityofprimestockmayleadto overthepastsixmonths,eveninAberdeen. prospectsofrentalgrowthavailablein arelaxationofcriteriainduecourse. Demandformulti-letindustrialestatesis otherpropertysectors,privatelocalinvestors Aperceptionthatoccupierdemand stillstrong,althoughthosethatdon’t inthecityhavebeendivertedelsewhere. isrecoveringmayalsoleadtoawider appealtofundsarenowchanginghandsat scopeofinvestmentactivity. doubledigityields.Ananalysisofthesales Theongoingriskofpre-packadministration inthelastsixmonthsconfirmsthatyields andtenantfailureissufficienttodeter Asbankscontinuetode-leverageapaceby formulti-letestatesgenerallyfallwithina investorsfromacquiringretailunitswith wayofloanportfoliosales,debtbuyerswill rangefrom8%to12%. significantover-rentingorinweakpitches, becomemoreinfluential,particularlywithin unlessyieldsareheavilydiscounted, thesecondaryandtertiarysectors.Inwhat Thereremainsahealthylevelofdemand evenincaseswheretheretailermight appearstobeaverycompetitivesector forsingle-letopportunities,letonlong previouslyhavebeenconsideredtoprovide ofthemarket,debtbuyersmayrequire leasesincorporatingfixeduplifts,to asolidcovenant. patiencetodelivertheirrequisitereturns. companieswithstrongcovenants.However, therehasbeenadearthofsalesofthis Theshoppingcentresectorisoffering Thelackofinvestmentinexistingstockand typeofpropertyinthelastsixmonths. attractiveincomeyields,particularlyinthe limitedspeculativedevelopmentshould Yieldsforprimesingle-letbuildingsletwith secondaryareaofthemarket,whereyields leadtoanincreaseinpre-letactivity.The longunexpiredtermsaregenerally7%. over10%havebeenachievedrecentlyon absenceofsuitableprimestockandthe suburbancentresinGlasgowandEdinburgh. associatedcostofdevelopmentfinancewill TheIPDtotalannualreturnfromScottish Asintheofficesector,thisdiscountedpricing leadtoanincreaseininstitutionalfunding. IndustrialPropertyfortheyearto alsoreflectstheadditionalvacantnon- Althoughbuiltproductmaywelltradeata December2012wasmeasuredat3.3%, domesticratesexposurefortheretailsector. premium,itislikelythatyieldsonforward comprisingincomereturnof7.4%and fundingtransactionswillalsoreduce. capitalgrowthof-3.9%.Ananalysisofthe Intheout-of-townretailsector,the threecentresoverthethreeyearperiod potentialtosecurewidenedplanning Further,selectivespeculativedevelopment from2009-2011confirmsAberdeen’sstrong consentsforbulkygoodsparkshas mayoccur,butmorelikelyinjointventures performancewhereTotalReturnsof12% promptedsomecautiousbuying,particularly withinstitutionsasopposedtoonmore wereposted,whileEdinburghandGlasgow wherecoreincomesitsalongsidevacant traditionalprofiterosionbases.Speculative returned7%and6.5%respectively. unitsoradevelopmentopportunity. developmentintheshorttomediumterm ismorelikelytobepromotedbycash-rich Retail IPDreturnsforScottishretailwere-0.5%for contractors. Theongoingchallengesoftheretailsector the12monthstoDecember2012,thefirst continuetoinfluencetheinvestment negativeannualreturnsincetherecession. FortheforeseeablefutureAberdeenwill market,withanotherrelativelyquietsix continueonitsupwardtrajectory.Itis monthsandfewtransactionsofnote. MarketProspects interestingtonotethattheoccupational Theoutlookforthecommercialproperty demandfromoil-relatedservicecompanies Primehighstreetdemandhaslargelyheld investmentmarketoutwithcertainsub-sectors isnowfeedingintothecentralbeltwhere upinthemaincitycentres,asevidencedby isbearish,asfragileoccupierdemand theavailabilityofstockandlabouroffers recentdealsinBuchananStreet,Glasgow underminesconfidenceandtheabsenceof opportunitytosatisfygrowth.Investors andPrincesStreet,Edinburgh.However, arobustlendingmarketcontinuestolimit willhowevercontinuetobeattracted insmallercitiesandtownspricingand activityanddepresspricinginthe toAberdeen,particularlythoseseeking saleabilitybecomeincreasinglyvolatile. secondaryandtertiarysectors. well-securedstockinagrowtheconomy.

16 RYDEN SCOTTISHPROPERTYREVIEWAPRIL2013 Ryden72ndpropertyreviewcoveraw1/5/1309:59 Page 3

Acknowledgements WearegratefulfortheassistanceofCoStar andInvestmentPropertyDatabank(IPD). Ryden72ndpropertyreviewcoveraw1/5/1309:59 Page 4

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