Nicola Sturgeon’s announcement on IndyRef2 coincided with the first day of MIPIM 2017. Theresa May’s robust response “Now is not the time” was delivered on the last day.
MIPIM is the world’s largest annual gathering of the commercial property industry in Cannes in the South of France, so how did investors active in Scotland react to the news of a second Independence Referendum in Scotland? After over 20 meetings with investors, with the majority of those based outside the UK, the feedback on Scotland was far less negative than I expected.
“Uncertainty is the new certainty” one head of a global fund manager summarised. With the Brexit vote, Trump’s win, and European elections in Holland, France and Germany, Scottish politics is far less of a concern than it was in 2013/2014.
Speaking with a number of other fund managers with global responsibilities, it was heartened to hear that they would continue to invest in Scotland, but the main question asked was whether current pricing reflected the increased risks of currency, potential changes to taxation and any impacts on economic performance.
So the conclusions reached, now I am back in the more familiar rain and cold in Glasgow, include:
- There is likely to be an increase in the number of sellers particularly from smaller funds and investors that cannot stomach the ups and downs that inevitably lie ahead in Scotland.
- At the same time, it looks like there is also going to be a continuing strong pool of buyers for good quality investments available at a discount to the rest of the UK and Europe.
- The next two months will be an important guide to market activity and pricing levels, as a large number of deals are currently under offer and as new product comes to the market. This week we launched two new office sales – Granite House in Glasgow and Horizons House in Aberdeen.
- The short term response of investors outside the UK is encouraging and contrasts sharply with the more emotional – and negative – response from many of our contacts in London (please don’t mention the rugby on Saturday again!).
- Scotland’s commercial property looks fundamentally cheap at a time when the asset class continues to be in favour from a wide range of investors across the globe.
- Occupational activity is holding up – particularly for offices in Glasgow and Edinburgh and there are even some early signs of recovery in Aberdeen, but also in retail, leisure, hotels and the growing appetite for private rented housing.
It certainly does not help investment decisions for the politics of Scotland to be on national TV every night. However, fortunately I missed most of that this week and benefited greatly from the experience and measured response of truly European and global investors who still see the long term attractions of Scotland and its commercial property market.
David Davidson is Cushman & Wakefield’s Chair of Scotland