1、 1 Property Times Glasgow Q2 2010 Strong quarter of grade A transactions 14 July 2010 Contents Executive Summary 1 2 Economic Overview 2 Offices 3 Key statistics 5 Investment 6 Definitions 7 Contacts 8 Author Ben Clarke UK Markets DTZ Research +44 (0)20 3296 2299 Contacts Martin Davis Head of UK M
2、arkets DTZ Research +44 (0)20 3296 2304 Tony McGough Global Head of Forecasting & Strategy DTZ Research +44 (0)20 3296 2314 Hans Vrensen Global Head of Research +44 (0)20 3296 2159 City centre activity increased again in Q2 to 153,000 sq ft as several long standing large grade A requirements comp
3、leted as expected (Figure 1). Annual city centre take-up is nevertheless forecast to fall in 2010, following the significant amount of exceptional large grade A deals that went through in 2009, particularly in Q3. City centre availability fell back in Q2, particularly grade A, following the increase
4、 in take-up. Overall though, availability is expected to be flat in 2010. The development pipeline is now effectively empty and future released space is expected to be offset by take-up. Headline rents are set to remain static in 2010, but as the proportion of grade A availability falls, we anticipa
5、te landlords will begin to take a harder line on incentive packages on larger deals (especially on those over 20,000 sq ft). There was a notable easing of the weight of money in the investment market in Q2. Prime yields for Glasgow offices are assessed to have moved out 25bps to 6.00%, while a prici
6、ng differential for anything other than 100% prime has become apparent, despite the ongoing shortage of opportunities. Unless there are more numerous and aggressive requirements prime asset values may undergo a small correction, while the pricing of good quality secondary assets that have narrowed t
7、he yield gap with prime is likely to be most affected. Figure 1 Quarterly take-up by grade 050100150200250300350Q22006Q32006Q42006Q12007Q22007Q32007Q42007Q12008Q22008Q32008Q42008Q12009Q22009Q32009Q42009Q12010Q22010s q f t ( 0 0 0 s )G r a d e A t a k e - up G r a d e B t a k e - up G r a d e C t a k
8、 e - upSource: DTZ Research Economic overview 2 The UK economy posted a second quarter of positive growth in Q1, albeit a fairly anaemic 0.3%. In Q2 the election of the new coalition government has brought with it a radical programme of major spending cuts and tax rises, which has resulted in lower
9、 bond yields and some currency appreciation. But the implications for employment and household incomes are likely to be negative in the short term at least. Household sentiment has also taken a hit at the prospect of a major pensions overhaul and there are now clear signs of a slowdown in the housin
10、g market after the recent rebound. The expectation is that the economic recovery will therefore be subdued and gradual, led by exports and, in the short term, restocking. Meanwhile business investment will be constrained in the near term by spare capacity and the uncertainty surrounding the recovery
11、. Oxford Economics expect Glasgow employment growth to turn negative over 2010-11, especially following the unwinding of public sector jobs. This will also affect support industries, such as business services. All measures of inflation have risen sharply over the early months of 2010. But the Bank o
12、f England has put these rises down to temporary causes, such as VAT increases, oil prices and exchange rate feed-through. This will facilitate the continuation of very low base interest rates over the medium term. Table 1 Economic indicators Indicator 2010 2011 2012 2013 2014 GDP 1.4 2.0 2.5 3.4 3.2
13、 Finance & business services GVA 2.5 3.6 4.4 5.9 5.9 Total employment -0.6 -0.4 0.3 1.1 1.5 Finance & business services employment 0.0 0.9 2.2 3.9 4.9 Source: Oxford Economics Offices 3 City centre activity again increased in Q2 to 153,000 sq ft as several long standing large grade A requirements c
14、ompleted as expected (Figure 2). Q2 demand was again driven by the financial and legal sectors, with Maclay, Murray and Spens, and Ernst and Young taking 38,000 sq ft and 21,000 sq ft of grade A space respectively in the newly completed G1 building. The most significant deal of Q2 came from The NFU
15、Mutual Life, which purchased the 75,000 sq ft newly completed Clarion building, with 43,000 sq ft for owner occupation. The NFU previously held pockets of grade B space in the city. Selecting Glasgow for a larger base will increase their overall employment headcount. With the exception of the 53,000
16、 sq ft pre letting to outsource operators Ceridian at Titanium Business Park, out of town activity remained subdued in Q2. Maxim secured only one 8,000 sq ft letting to Currie and Brown Consulting. This continues to demonstrate that while out of town parks can offer exceptional deals the attraction
17、of city centre/edge of centre locations remains a strong pull. Availability edged down in Q2 across all grades, but particularly grade A, following the increase in take-up (Figure 3). Cuprum and the G1 building completed in Q2, totalling 227,000 sq ft. The G1 building has only two and a half floors
18、left, while Cuprum is already being marketed as fully available. In general, fewer major tranches of space are being returned to the market now that business conditions have stabilised somewhat. However, Royal Sun Alliance are to vacate 49,000 sq ft at 200 St. Vincent Street as part of their Q1 move
19、 to occupy 30,000 sq ft in Alexander Bain House. The existing premises are under offer to an owner occupier. Prime rents were unchanged in Q2 (Figure 4) and incentive packages have largely stabilised at around 28-36 months rent free on a 10 year lease. There is still quite a range of grade A space o
20、n offer, but following the G1 building letting, the choice is beginning to become restricted. It is still very much a tenants market, but the balance is shifting back towards landlords though this depends on the individual circumstances of the landlord and property in question. Figure 2 Quarterly ta
21、ke-up by grade 050100150200250300350Q22006Q32006Q42006Q12007Q22007Q32007Q42007Q12008Q22008Q32008Q42008Q12009Q22009Q32009Q42009Q12010Q22010s q f t ( 0 0 0 s )G r a d e A t a k e - up G r a d e B t a k e - up G r a d e C t a k e - upSource: DTZ Research Figure 3 Availability by grade -2 0 0 , 0 0 0 4
22、0 0 , 0 0 0 6 0 0 , 0 0 0 8 0 0 , 0 0 0 1 , 0 0 0 , 0 0 0 1 , 2 0 0 , 0 0 0 1 , 4 0 0 , 0 0 0 1 , 6 0 0 , 0 0 0 1 , 8 0 0 , 0 0 0 2 , 0 0 0 , 0 0 0 Q22006Q32006Q42006Q12007Q22007Q32007Q42007Q12008Q22008Q32008Q42008Q12009Q22009Q32009Q42009Q12010Q22010s q f t ( 0 0 0 s )G r a d e A G r a d e B G r a d
23、 e CSource: DTZ Research Figure 4 Prime rents 2 0 . 0 02 2 . 0 02 4 . 0 02 6 . 0 02 8 . 0 03 0 . 0 0Q22006Q32006Q42006Q12007Q22007Q32007Q42007Q12008Q22008Q32008Q42008Q12009Q22009Q32009Q42009Q12010Q22010 p e r s q f t p e r y e a rSource: DTZ Research Offices 4 Current enquiries are now more limited
24、 after the last two buoyant quarters of lettings. There are, however, a number of requirements between 20,000 and 80,000 sq ft in the market. Outsourcing companies are still active in the city centre - attracted by the skilled labour pool and potential grant assistance on offer. While private sector
25、 professional, financial and legal sectors are likely to drive future take-up, demand for space from the public sector is expected to be muted throughout 2010. Job losses and/or voluntary redundancies are likely within Glasgow City Council. There is some possibility of take-up through consolidation
26、though there is an overwhelming pressure to limit capital expenditure at the moment. Following the volume of large grade A deals completed in 2009, city centre take-up is forecast to fall back a little in 2010 (Figure 5). However a large deal from a footloose corporate occupier has the potential to
27、skew this figure while there are suitable grade A floorplates still available. Current occupier requirements suggest there will be further consolidation and negative net absorption from the private sector, though generally at a much-reduced rate than over recent quarters. Occupiers will continue to
28、take advantage of the current market to upgrade to better quality and more efficient space, reducing further the proportion of grade A availability. Government departments are likely to release space gradually as and when various lease events occur over the next several years. The traditional bankin
29、g industry is also likely to offload some more space, The citys development pipeline is now essentially empty. The delayed 64,000 sq ft Copenhagen building is still to complete but the timeframe is now indeterminate after the contractor defaulted. So on balance, city centre availability is expected
30、to be flat in 2010 (Figure 6). Headline rents are set to remain static in 2010 (Figure 7), but as the proportion of grade A availability falls, we anticipate landlords will begin to take a harder line on incentive packages on larger deals (especially on those over 20,000 sq ft). This should filter t
31、hrough to a slight increase in headline rents by 2011 unless some more comprehensive grade A refurbishments come to the market. Figure 5 Annual take-up and new supply 2001-14 010020030040050060070080090001 02 03 04 05 06 07 08 09 10 11 12 13 14s q f t ( 0 0 0 s )T a k e - Up N e w S u p p l ySource:
32、 DTZ Research Figure 6 Availability, 2001-14 02004006008001 , 0 0 01 , 2 0 01 , 4 0 01 , 6 0 01 , 8 0 001 02 03 04 05 06 07 08 09 10 11 12 13 14s q f t ( 0 0 0 s )Source: DTZ Research Figure 7 Prime rents, 2001-14 2 0 . 0 02 2 . 0 02 4 . 0 02 6 . 0 02 8 . 0 03 0 . 0 03 2 . 0 001 02 03 04 05 06 07 08
33、 09 10 11 12 13 14 p e r s q f t p e r y e a rSource: DTZ Research Key statistics occupier market 5 Table 2 Occupier market Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q/Q change (%) Y/Y change (%) Outlook Take-up 57,926 292,407 25,543 104,250 152,930 46.7 164.0 Availability 1,302,069 1,563,418 1,569,0
34、97 1,829,821 1,715,513 -6.2 31.8 New supply 125,000 286,055 10,500 0 227,000 N/A -42.6 Prime rents 28.50 28.50 26.00 26.00 26.00 0.0 -8.8 Source: DTZ Research Table 3 Q2 key leasing transactions Address Size (sq ft) Tenant Sector The G1 building 38,409 Maclay, Murray and Spens Legal The G1 building
35、20,760 Ernst and Young LLP Financial 3rd and 5th-9th floors, Clarion, 29 Wellington St 43,359 NFU Mutual Life (purchased 75,249 sq ft) Financial Source: DTZ Research Investment 6 Investor sentiment in the regional office markets turned more cautious in Q2 and there was a notable easing of the weigh
36、t of money in the market. Prime yields for Glasgow offices are assessed to have moved out 25bps to 6.00%, while a pricing differential for anything other than 100% prime has become apparent, despite the ongoing shortage of opportunities. Much of the institutional money has been invested and cash inf
37、lows to retail funds have dropped - in some cases funds have experienced net redemptions. This probably stems from a perception that the recent window of yield compression is now over, exacerbated by concerns about the economy (post-General Election) and the impacts of the eurozone sovereign debt cr
38、isis. Furthermore, the rally in stocks over 2009 that encouraged demand for commercial property via portfolio rebalancing has been unwound following the drop of around 14% in the FTSE-100 over May - early July 2010. UK institutions remain the most active overall, although private investors are activ
39、e in the smaller lot size markets. Debt-backed buyers continue to be disadvantaged, with property companies still effectively out of the market. The fall in requirements from German investors has been notable, caused by the temporary closure of some funds. This was aimed at halting the withdrawal of
40、 cash by investors in light of proposed regulatory changes by the German authorities that will make the funds less flexible. Most vendors have been seeking to take advantage of the significant improvement in prices that occurred over 2009, when investor demand outstripped available investments. The
41、balance has shifted, but the market continues to be very much supply-constrained, with many leveraged investors that cannot afford to sell, sitting on their stock and paying down the debt. Pricing over the remainder of 2010 will be very sensitive to the stance that institutions adopt on regional off
42、ices. Unless there are more numerous and aggressive requirements prime assets may undergo a small correction, while the pricing of good quality secondary assets that have narrowed the yield gap with prime is likely to be most affected. It seems likely, however, that current inactivity will be replac
43、ed by an increased need to spend allocations by the end of the year, which will at least give some boost to transaction volumes. Figure 8 Prime yields, 2001-14 2345678901 02 03 04 05 06 07 08 09 10 11 12 13 14%Source: DTZ Research Table 4 Significant deals Address Purchaser Vendor Price - m (initial
44、 yield) West George Street, 180 Skandia Property Fund Equitable Life Assurance 17.43m (6.70%) MacFarlane House Hamilton Capital Partners n/a 5.75m (n/a) Festival Court Private investor Private investor 1.3m (9.80%) Broadway One KanAm Grundinvest Fonds IVG UK Ltd, Ediston Properties 51m (5.77%) Colle
45、gelands, Phase 1 Standard Life n/a 55m (n/a) Source: DTZ Research Definitions 7 Availability: Marketed space (usually available to move into within 6 months) that may or may not be vacant. Availability ratio: Office space currently available as a percentage of stock projected six months ahead (i.e.
46、 includes speculative completions during that period). Floorspace: Floor area in sq ft adopted throughout is net internal area. Coverage is all office units over 500 sq ft. Newly available: Floor space placed on the open market including both developments within six months of completion and units of
47、 second-hand space. Stock: The total office accommodation in the commercial and public sectors. Building grade: Grade A: newly developed or comprehensively refurbished to new standard, including sublet space in new/refurbished buildings not previously occupied. Grade B: buildings of good specificati
48、on, floor plate efficiency and image usually but not exclusively ten years old or less. Grade C: remaining poorer quality stock. Speculative development: A newly developed or comprehensively refurbished building undertaken without the benefit of a secured tenant. Development start: A development in
49、which work has started on the main contract. This usually excludes demolition and site clearance contracts. Development completion: A development in which the main contract has been completed, whether this be to shell and core or developers finish. Active demand: Named entities with appointed agents and a declared requirement for office accommodation whic
