Commercial property in Glasgow

Looking ahead, what do you think are the biggest challenges, as well as opportunities for Glasgow's commercial office property sector over the next two to three years?

The biggest challenge without doubt is bringing confidence back into the property market. Glasgow was fortunate enough to have a substantial amount of retail and commercial development in the pipeline when the recession took hold and this has kept a momentum in the market not apparent elsewhere. Securing tenants for the space which has been constructed is vital if the next round of development projects is going to be brought forward.

I expect that demand for commercial and retail space will recover, driven by demand from companies in the City who we know are waiting to expand, and inward investors who we have been tracking for some time, but who have put their projects on temporary hold until the economy is in full recovery. The Council will be playing its full part by continuing to develop innovative ways of marketing its own land for development and using new financial instruments such as Tax Increment Financing to de-risk the development process.

Why should an individual investor or institution invest in commercial office property in Glasgow, rather than one of your competitor cities?

Although rental levels, and therefore property yields, have taken a bit of a battering over the last couple of years, there has been a surprisingly high level of activity in the commercial market with the arrival of Tesco, expansions in both esure and Fortis and many of the leading legal companies taking new space. The most recent annual employment figures show that Glasgow has yet again been the fastest growing employment base of any City in the UK and with the stream of new business projects in the pipeline, I expect demand for commercial space to rise sharply over the next two to three years. As existing space is taken up, it creates new opportunities for developers who are prepared to bring new projects forward.

Can you sum up for us the approach Glasgow Ciy Planners take in their relationship with commercial property developers?

Our Planning and Building Control functions have been completely revised to ensure they  are delivered in a way which understands the mechanics of the development process. Typically, our dialogue with a developer will start from the timescale for completion and opening and work back to when a planning consent needs to be in place. Working with the developer's team we then programme what we require by pre application discussions, when we need the planning

application to be submitted, and agree a date on which we propose to take an application to our Planning Committee. I like to think that if an application has an exceptionally critical timescale, we can be flexible enough to meet it and we have several examples where we have done just that.

Looking ahead, what forthcoming commercial developments in Glasgow excite you the most and why?

The biggest challenges at the moment are delivering the new Buchanan Galleries phase since it is our pilot Tax Increment Finance project and will provide a pilot for the wider  extension of this to other developments in the City. However the prospect of a Phase 2 of the International Financial Services District with completion of the project all the way along the Broomielaw is of huge importance to the City, given the growth and importance of financial services and the opportunities which are still there for the City to build on.

Perhaps the most exciting immediate prospect is the range of developments which are coming forward on the back of the 2014 Commonwealth Games.

How do you think increasing competition from out of town business parks will impact on the city centre office market?

Out of town development clearly offers occupiers additional choice and, given differences in land values, often allows rents to be significantly lower than the City Centre. However rental level is only one of the factors which influence a business location decision. Our own cost experience is that businesses are increasingly placing more emphasis on total business operations and that factors such as access to skilled labour, access and communications, access to specialist business services and access to customers and suppliers are playing a large part in locational decisions. Many businesses have looked at out of town locations and decided that the City Centre or close to the City Centre is the place to be from a bottom line perspective.

With relatively low levels of office property development in the city centre, largely due to lack of finance what can the business communicty do to assist the City Council to make sure Glasgow remains at the forefront of new development compared to other cities?

The Council and the property market both want to see development taking place, and property being filled. Initiatives such as the IFSD partnership which involve both the public and private sector in delivering the product and promoting the concept have been crucial in maintaining Glasgow's competitive momentum for financial services. Although the Council has a very effective promotional machine through the City Marketing Bureau we benefit greatly from business endorsement of Glasgow as a business location. Tesco Bank or JP Morgan addressing a business audience and explaining why they decided Glasgow was the right location for them, is a far more powerful message than the City Council doing the same. Third party endorsement of the City by the business community must therefore become a bigger weapon in our promotional armoury and we are actively working to develop this further.

Steve Inch, DRS

Glasgow City Council

(Reproduced from Lambert Smith Hampton's Glasgow Office Market Report)

01 May 2010