Scotland’s largest city has been enjoying a period of regeneration. What opportunities does it present for landlords and businesses?
When Glasgow hosted the Commonwealth Games in 2014, it brought huge social, cultural and economic change to the city, with big investment in both private housing and commercial property.
We look at the latest developments in the property scene and consider how landlords and SMEs can benefit from them.
Key projects planned for Glasgow
Glasgow has seen major economic growth in recent years, boosted by a young population and growth in the technology and service sectors. The city council’s Economic Strategy aims to make Glasgow the most productive major city economy in the UK by 2023. According to Ernst & Young, Glasgow’s economy is set to grow by 2.1% a year, outperforming Scotland’s overall economic growth[i].
Part of the Economic Strategy involves building 25,000 new homes and increasing the number of people living within the city centre.
Work has already begun on regenerating the Gorbals area, which will see 360 houses and flats built on a vacant site on the south bank of the River Clyde. Plans have also recently been announced for a major new office block development on Argyle Street in the heart of the city’s financial district. It’s expected that the building will house up to 4,000 staff.
Stuart Patrick, chief executive of Glasgow Chamber of Commerce, says: “It’s tremendous to see a derelict site being repurposed for new use, helping to tackle a shortfall in the market for genuine Grade A space. Such a major project, stemming from significant inward investment, is a huge benefit to the city’s economy but also testament to its strength.”
Opportunities for landlords
Glasgow has one of the strongest rental markets in the country, with high demand for homes-for-let. It has a burgeoning student population, with four universities and seven higher education establishments in the area. Young professionals aged between 20 and 40 also make up a substantial proportion of the city’s population. Glasgow’s vibrant cultural scene attracts many people to the area, and the city is a popular tourist destination, presenting opportunities for holiday lettings.
For property investors priced out of London and other English cities, Glasgow is an attractive prospect. In January 2018, the average property price in London was £487,500, according to Hometrack’s UK Cities House Price Index. In Glasgow it was just under £120,000[ii].
There are also plenty of opportunities for commercial landlords, with Knight Frank’s 2018 UK Regional Cities Office Market Review showing that transactions in the occupier market were 19% above the 10-year average in 2017, with take-up in the city centre reaching 633,700 sq ft[iii].
In fact, demand is outstripping supply, with just 61,000 sq ft of Grade A office space available in Glasgow centre at the end of 2017, something Knight Frank anticipates will lead to greater competition for high quality space, and rent rises of around 5%.
Opportunities for businesses
Glasgow is home to many flourishing small businesses and, in recent years, has attracted a number of digital media and tech start-ups. As of March 2017, SMEs accounted for 37.6% of private sector employment in the Glasgow City local authority area[iv].
The regeneration of the area around Port Dundas has created a new creative hub, while 1.9 million square foot of other office developments are in the pipeline.
According to a report by estate agent Savills, mixed-use developments will be the ‘key driver’ bringing forward new residential, office and leisure development in the city centre.
What challenges lie ahead?
Glasgow is a thriving city, but it’s not without its challenges. It remains the most deprived city in Scotland, and unemployment is relatively high compared with other UK cities.
The uncertainty over Brexit may also affect the property market in the longer term as it’s difficult to predict how it will impact the UK’s economic health. If inflation soars and interest rates are raised, there will be less capacity for house price growth. But if Brexit negotiations are successful, property prices could increase at a faster rate than previously thought.
Mark Gregory, EY’s chief economist, says: “Unsurprisingly, Brexit is the biggest unknown factor in Scotland’s immediate economic future. If uncertainty around this issue eases and government can provide greater clarity for business, we can hope to see an increase in business confidence and investment. This will undoubtedly be assisted by government and business working together, harder and smarter than before.”
NIG in Glasgow
NIG’s regional office in Cadogan Street, Glasgow, has recently undergone a period of significant growth and development. Seven new recruits joined the team in 2018 – taking the number of underwriters to seventeen and bringing considerable property expertise and experience, particularly in the Property Factor market.
Having a strong presence in Scotland allows NIG to really get to know the regional market and develop strong relationships with brokers working in the area, so it can develop programmes that meet the market’s needs.
Seminars and information sessions for brokers are held regularly at the Glasgow centre, or they’re invited in to meet underwriters face-to-face. This helps build up a level of trust and understanding, as well as giving underwriters the opportunity to get to know the challenges brokers are facing and ultimately ensuring that NIG is providing the right services to meet customers’ needs.
If you’d like more information on how NIG can help you, please contact our team.