By Scott Wright

MORE than £600 million of commercial property investment stock has been withdrawn from sale or failed to find a buyer in Scotland this year amid the severe dislocation caused by the coronavirus pandemic.

The Gyle Shopping Centre in Edinburgh, Bon Accord shopping centre in Aberdeen and Clyde Shopping Centre in Clydebank are among properties where marketing efforts have been hampered by the inability of prospective buyers, including those from overseas, to inspect sites. Office blocks, including Ardent West and Bridge View and Consort House in Aberdeen, have also been temporarily taken off the market, revealed David Davidson, chair of property firm Cushman & Wakefield in Scotland.

Mr Davidson said investment volumes for concluded sales in Scotland are currently running at 50 per cent of the 2019 total, when the market was affected by Brexit uncertainty and the General Election in the fourth quarter. This year’s volumes are running at just 30% of the 2018 level.

Mr Davidson said the lack of market activity is holding back economic development in Scotland. “The reason it is happening is that people can’t travel and inspect [sites], so those people who would be buyers, local or national, are unable to do the diligence that would be required to do something as complex as a buying a commercial property investment,” he explained.

While the residential market benefits from the single survey system, commercial buyers do not have the same luxury, Mr Davidson noted. And, with the market in stasis, developers and investors are finding it more difficult to generate proceeds to move on to new projects in Scotland.

“If we want more development, and more economic development, the lack of ability to sell slows down the pipeline, because developers do not have the cash to put into the next project.”

In contrast, “there has been a notable uptick in investor activity in London”, observed Mr Davidson. With many global-based investors having bases in the UK capital, “they have the ability to inspect property more easily than in Scotland,” he explained. “Therefore, there is a wider pool of buyers… and the market seems to be functioning. Not at the same level it did historically, but still functioning much better than it is in Scotland.”

Mr Davidson voiced his concern over the impact that protracted working from home is having on the mental health of the office-based working population. While the first lockdown coincided with spring and good weather, which allowed people to spend time outside more easily, the current restrictions have come at the onset of winter.

“I don’t disagree that we have to get on top of the virus, but the imperative to get people back is growing because of the winter months,” Mr Davidson said. “There are a lot of things building up here. Getting people back to their place of work is becoming increasingly important.”

Mr Davidson said hopes that a coronavirus vaccine could begin to be rolled out before the end of the year, following encouraging news this week on trials of the Pfizer-BioNTech trial, “changes everything” in terms of people’s mindsets and “what they are prepared to do”.

While cautioning that it will still be a “long run” before anything approaching normal activity returns to office life, as well as sectors such as hospitality, tourism and travel, he added: “I think it will encourage investment and activity, because people will see that there is now a positive direction.”

Asked how the property industry has received the news, he said there is “considerable optimism, because there is an end potentially in sight, which there wasn’t four weeks ago.”

“There has been a noticeable increase in the mood of the people I am speaking to” he added.

“The contrast between the lockdown previously, where there were light nights [and] sun, it is quite noticeable how many people are feeling this second lockdown is harder to deal with than the first one. I think that is the thing the vaccine is going to change – it is going to change that pessimism, that there is something to look forward to next year.”

Some concern has been expressed around the distribution of the Pfizer vaccine, notably the requirement for it to be stored at -70 degrees. Mr Davidson said his “bigger worry is that this has been an extremely deep downturn, and it is going to take much longer for it to get back up to speed than I think the optimists suggest”.