Drivers Jonas - General - Glasgow,

Date: 01 Oct 2009

Development on hold but there are signs of optimism in Glasgow city centre

The latest Drivers Jonas LLP Crane survey for Glasgow show s that construction activity has continued to slow down from the previous survey with no new starts recorded this survey in any of the market sectors, compared with eleven last year. The survey reports that development in the city centre has reduced from 30 developments in 2008 to just 13 today, with the only activity taking place on schemes that started prior to the sharp economic downturn.

Alasdair Ramsay, Partner, Drivers Jonas LLP in Scotland, said:
"There are a range of signs which hopefully point towards stabilisation in the market and a tentative return to growth post-2009. Although we expect to see an oversupply of Grade A office space towards the end of the year, there have been no new office starts recorded in this survey and no new office developments scheduled for delivery after 200. This could allow for the current oversupply to be absorbed relatively quickly once market confidence and demand returns. Once the development pipeline clears, rental levels should rise as demand will once again outstrip supply in the city centre for Grade A office space."

Three office developments have completed in Glasgow during 2009 so far and seven more are due to complete in quarters three and four. (In sharp contrast to 2008, when no new stock was added to the market). These ten schemes will deliver a total of 939,000 sq ft of Grade A office stock, the largest volume of supply to be delivered in a single year since our Crane Survey records began in 2000. At the nine-year average annual construction delivery rate of 259,700 sq ft, this is almost four times the average annual supply

This large volume of new space is coming online at a time when occupier demand has slowed and availability levels are expected to increase sharply. At the start of the third quarter, 88% of the 2009 supply was still available.

RETAIL
The recession has hit the UK retail sector hard, with many retailers forced into administration and in some parts of the country high streets are almost unrecognisable today from 18 months ago. However, with its reputation as the best UK retail destination outside London, the Glasgow retail market has been holding up fairly well.

Construction has not yet started on the Buchanan Galleries extension although outline planning consent was granted in 2008. On completion, the new scheme will total an estimated 1.3 million sq ft making it one of the largest shopping centres in Scotland.

HOTELS
In 2007 Glasgow launched its new 10 year tourism strategy and several ambitious targets to promote the city as a tourist destination were set. One of the targets is to add 3,000 hotel bedrooms with a view to increase capacity for 2014, when the city hosts the Commonwealth Games. However, the economic downturn has lead to several hotel developments being delayed, for example the Jumeirah Glasgow Hotel
on Argyle Street and the Bothwell Plaza, which have both been granted planning permission but have delayed starting construction. With tourist numbers significantly down as a result of the credit crunch it might now take longer for developers to justify starting their planned schemes.

RESIDENTIAL
Our 2008 Crane Survey reported that the residential development market in Glasgow has slowed considerably with a 94% fall year-on-year in construction activity. The low supply pipeline trend continues, with only 122 units set to complete this year. With a nine year average annual delivery rate of 580 units, the totals for 2008 and 2009 amount to just over a third of the average. Furthermore, there are no developments
currently scheduled to complete post-2009, suggesting 2010 might turn out to be the lowest supply year in the Crane Survey's history.

Alasdair Ramsay concluded:
"This research shows there is little construction activity in Glasgow city centre at present, however the developments that have taken place in recent years have reinforced confidence in the city. Plans are currently being prepared for several commercial developments, even during the recession. On the periphery of the city centre a number of public and private sector bodies, under the umbrellas of the Clyde Waterfront and the IFSD groups, are actively working to develop and expand the
commercial core of the city on the south side of the river.

"These projects and other proposals on a similar scale demonstrate the continued public and private sector interest during this difficult economic period and will support the growing tourism, conferencing and exhibition sector as well as having an eye on the Commonwealth Games in 2014."

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