• Kevin Murphy

Scotland: Glasgow Property Review

The popularity for Glasgow continues and expansion of new developments on the edges of the city centre are making way for new and much needed commercial and office space. As a result Barclays's has decided to construct by the Drum Property Group its new headquarters on 470,000 square feet of space at Buchanan Wharf in Clydeside in a new report from Savills.

The site for the new headquarters is a brief 10-minute stroll from the Glasgow Central station on the bank of the River Clyde. Access to the location is available by the M8 roadway with the airport about 15 minutes away.

Designed as mixed-use project the Buchanan Wharf will feature over 1 million square feet of Grade A office space along with a residential area, hotel, amenities and public spaces. It is hoped that more large scale developments will be attracted to the area. The report finds that the Clydeside location has a number of unused industrial sites that could be converted for commercial and residential purposes.

Buchanan Wharf was purchased by Legal & General Capital and PGGM. Additional financing was provided by LGIM Real Assets and its build-to-rent fund.

Buchanan Wharf, Glasgow

Contracts Exchanged

Recent updates by Scottish Construction Now indicate that the development of 300 build-to-rent apartments for Glasgow city will begin this year as a result of contracts by pension and investment group Legal & General. The arrangement allows funding with the Drum Property Group to deliver the apartments at the new Buchanan Wharf adjacent to the new Barclays's office development.

Legal & General has made additional acquisitions over the past year with the development of a new 160 room hotel, the acquisition of the Scottish court and tribunal building, Atlantic Quay 3.

Additional construction for a £100 million development for build-to-rent 500 apartments at Clydeside Central Quay has been approved by the Glasgow City Council and Moda Living has been granted its request to build 433 rental homes in the former Strathclyde Police headquarters on Pitt Street along with a 700-home development by Get Living near High Street.

Two 18-storey towers will be featuring spaces for dining, a gym, lounge for residents and a game room with a 4,250 sq ft of communal roof terrace overlooking the River Clyde.

Paul Miller, MD principal investing at Legal & General Capital, said:

“We are delighted to be making our first build-to-rent investment in Scotland as part of our ambition to tackle the housing shortage all across the UK. Scotland, and Glasgow in particular, has been a key target for Legal & General as part of our Future Cities initiative. We are excited to be bringing a long term sustainable rental scheme to the area to meet the demands of this vibrant and fast-growing city.”

Dan Batterton, head of build-to-rent at LGIM Real Assets, said:

“Glasgow has seen very low levels of residential development over the last decade. This acute supply and demand imbalance has made it an important target for us, demonstrating our commitment to quality asset selection, with sites cherry-picked by assessing needs based demand to provide long-term, stabilised cashflows for investors.

“With Glasgow predicted to continue to see notable population growth, this latest acquisition is another great example of Legal & General investing in an area with significant urban regeneration potential and providing large scale sustainable rental schemes which will have a positive long term socioeconomic impact, delivering

much needed homes.”

Knight Frank reports in Scottish Construction Now that £2.5 billion was invested in commercial property for offices, retail, industrial and specialist property for 2018.

UK funds had an 58% increase in their investments this past year to £771 million with foreign investors and purchasers with £920 million in transactions. the investment in Glasgow offices was the highest since 2006 with £468 million.

Alasdair Steele, head of Scotland commercial at Knight Frank, said:

“It was a solid year for Scotland as we saw UK funds return to the market and overseas investors maintain their high level of interest. The demand for Scottish commercial property has seen prime yields edge towards 4.5%; but Edinburgh and Glasgow, in particular, still offer good value compared to London and some of the UK’s other major cities."

John Rae, capital markets partner and head of office at Knight Frank Glasgow, said:

“It was a terrific year for investment in Glasgow’s commercial property market –particularly offices. Many of the biggest deals in the city involved overseas buyers,who have become the main drivers of transactions for prime office assets in the city we’d anticipate that remaining the case for the year ahead."

“With so little new stock coming on to the market over the next 12 months, we’re anticipating rental growth in Glasgow – which is good news for investors. However, like Edinburgh, it’s becoming a difficult market for investors to get into, with yields hardening and a great deal of competition for the best available assets.”

Business Insider and Colliers International report that the retail sector had transactions fall by 16% to £560 million with only a single shopping centre deal recorded. The office market attracted £1 billion in new capital thus off setting the shortfall with the retail sector.

Douglas McPhail, head of Colliers' Glasgow office, said:

"With transaction totalling £1.02 billion in 2018, the Scottish office market was the most sought-after sector for the second year running."

"At £1.02 billion, investment volumes were up more than 20 per cent from 2017 and the highest since 2006."

"Investors mainly targeted Edinburgh and Glasgow, which together made up nearly 70 per cent of all investment."

Mr. McPhail also added that foreign money accounted for 50% of all transactions with the American real estate firm LCN Capital Partners' buying Aberdeen International Business Park for £113 million was the largest deal in 2018 and Legal & General's acquisition of Glasgow's Atlantic Square for £100 million.

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