Scotland cities like all UK cities moved down the ULI/PwC European Emerging Trends in Real Estate rating however, investment sentiment remains higher than London (no. 27) with Edinburgh rated 24^th. Residential markets (housing, PRS, student housing and aged care) top the 10 investment opportunity areas however, a focus on asset performance and ‘customer’ engagement indicates there may be limited market movement.

Liz Waller, ULI UK Executive Director provided a snapshot of the 2017 report findings which like last year raised the challenge of uncertainty but also looked forward towards an innovative future. Edinburgh is still seen as a ‘Fair’ investment prospect and the view towards 2030, highlighted that innovative technology (efficiency, performance and new business models) , Social Change and the Sharing Economy will each have significant market influences.

“A time to be outward looking and make brave decisions” Liz Waller, ULI UK Executive Director

A Scottish market review led by Nick Ireland Co Head, Direct Property UK, Aberdeen Asset Management, Caroline Shand, Partner, Property & Infrastructure, Shepherd & Wedderburn, Steve McGavin, Planning & Development Director, GL Hearn Limited and moderated by John Forbes, John Forbes Consulting, indicated that without political certainty the market remains volatile. However,  volatility has also led to the rising importance of ensuring assets remain competitive resulting in an increased value on place and quality of life as indicated by cities such as Dublin and Copenhagen moving up the ratings.

Audience sentiment indicated that Edinburgh and Glasgow remain resilient due to a diverse market offering, with recent funds from both South African and US investing in the cities. Opportunity markets include Hotels and PRS while like the last few years a significant shortage of Grade A commercial still remain a challenge indicating that business growth or diversification limitations still exist.

City Deals are interestingly seen as a huge opportunity but only if a coordinated approach to infrastructure and housing were to be delivered. Public Private Partnerships (PPP) and innovative funding models are therefore likely to be the only way forward as banks are seen to be conservative but an ever-increasing market of lenders is creating a wealth of opportunity.

A discussion around the ‘crystal ball’ revealed that the ‘traditional’ real estate processes are leading towards a more dynamic market where short lease terms are the norm and tenants are referred to as ‘customers’. This indicates the market is shifting towards a service model where retaining the value of an asset or portfolio is increasingly important. How will the market adapt to continued flexibility and an ever-changing ‘customer’ base?

Dundee Waterfront was highlighted as a shining example of bold investment and the delivery of flexible buildings. Underlying the success of this scheme is the leadership from the local authority and control of ground floor leases to provide dynamic public amenities integrated with business.

The continued Government austerity is resulting in a range of Government assets entering the market in the upcoming years. With limited public sector finance, it will be interesting to see how the release of these assets can foster innovative financing and sustained growth.

Underlying Scotland’s future growth is its demographic structures where a large proportion of the population (‘Baby Boomers’) are entering retirement age. Likely influences of this change will include pressure on aged care but also significant implications for both health services and government revenue.

Innovative businesses, flexible building use and coordinated leadership could bring an exciting future to Scotland. It was clear from this forum that Scotland remains a balancing act as political uncertainty is calming the current market. 2017 it seems will be a time for strategic decisions, continued volatility and political anticipation.

Important Links:

Emerging Report: 2017 Emerging Trend in Real Estate

ULI Presentation: Emerging Trends in Real Estate 2017 Presentation by Liz Waller, ULI UK Executive Director

A special thank you to PwC Scotland for hosting and John Forbes for leading the development of this event.

For further details about ULI Scotland please visit: ULI Scotland