An overview of the commercial property market in Glasgow

Glasgow's position as a leading financial and business centre has had a positive effect on the local commercial property market, especially when it comes to retail and office floor space. According to the local city council, Glasgow's retail industry ranks second in the UK. This fact is reflected in the large amount of retail floor space devoted to this purpose, although lately new developments have been few and far in between. Properties used for leisure and entertainment purposes are also in demand in the city, and it is expected that demand will become stronger as we approach the 2014 Commonwealth Games.

According to research conducted by GVA Property Advisers, during the third quarter of 2012 headline rents for commercial property in Glasgow experienced a slight decline of 1.3 per cent, and are currently estimated at £27.5 per square foot.

Glasgow's most sought-after commercial properties are concentrated around the following areas:

The "Style Mile" - This area is devoted mainly to retail floor space and includes Buchanan, Sauchiehall, Ingram, and Argyle streets, as well as Princes Square and the Royal Exchange Square.

Glasgow's West End - The West End has a large concentration of properties used for retail and entertainment purposes. There are also a number of business centres offering flexible office space solutions in the area.

St Enoch Centre - Although St Enoch is part of Glasgow's Style Mile, this area has undergone a £150 million redevelopment that has increased the amount of prime retail floor space available in the city centre. Currently, St Enoch's offers 850,000 square feet of retail space.

City Science - This development consists of 430,000 square feet of commercial floor space that is to be mainly occupied by companies in the sectors of technology and R&D.

International Financial Services District - This is a £1 billion investment which currently provides over 2 million square feet of Grade A office space. A second phase is already underway and it is expected that its completion will alleviate the shortage of Grade A office space in Glasgow.

Office space in Glasgow

Over the past four years, Glasgow has seen an increase in the take-up rates of refurbished and second hand office space, as Grade A office space in the city seems to be reaching the point of undersupply, given the city's low levels of new office property developments. Glasgow's take-up rates have increased even during the worst of the recession, and are currently in the region of 32,000 square metres, a figure that represents a 13 per cent increase over last year's numbers.

While prime office space in the city centre can fetch £27 per square foot, office space in the city's numerous business parks ranges between £13 and £17 per square foot.

Retail space in Glasgow

Despite the significance of the retail industry to Glasgow's economy, the retail property market has stagnated over the past four years. In line with the trends observed in other British cities, the retail market in Glasgow has been severely affected since the onset of the recession, a fact that has contributed to diminished investor interest and to weak demand for retail floor space. Retail yields have experienced a sharp decline in Glasgow since 2009, when they reached 5 per cent, to barely 2 per cent in 2012. Another indicator used to measure the health of the local retail property market is the annual rental growth rate. During 2012, annual rental growth rate values reached -3.2 per cent, a figure that highlights the gloomy situation that the retail property market in Glasgow is experiencing.

According to GOAD Retail Property Intelligence, approximately 19 per cent of the total retail floor space in Glasgow is currently vacant. However, Glasgow has Scotland's largest amount of town centre retail floor space, with over 440,000 square feet and an additional 220,000 square feet devoted to retail warehouse space.

Data for 2009 showed that the annual cost of prime retail rents in Glasgow was of £1,500 per square metre. Top city centre rates were set at £27 per square foot, a very competitive rate given Glasgow's popularity as a shopping destination.

Industrial space in Glasgow

Until 2011, the industrial property market in Glasgow saw very little movement and a low volume of transactions. However, since the past year the situation seems to be slowly improving, particularly in the case of medium-sized properties of up to 2,700 square metres and of transactions related to properties outside Glasgow's city centre. During the third quarter of 2012, out of town industrial take-up rates have totalled almost 113,000 square feet of floor space. Hillingdon Industrial Estate, located in the outskirts of Glasgow, is the largest of its kind in Scotland. Other popular locations for industrial properties include Westway Park and Queenslie Industrial Estate.