2022 FORECAST
Glasgow
- 9,600 jobs are expected to be added to the job market, which would mean more people being employed in Glasgow than at any other time.
- The city will see the advancement of the Avenues project during the course of the year, with Block A including Argyle Street due to complete during the course of the year.
- New office demand is coming from R&D occupiers looking for quasi-office space, while the demand from small businesses for flex office space is likely to increase the provision across the market – with a number of high-profile operators looking at the city.
- COP 26 was a much-needed fillip for Glasgow hoteliers and gives confidence that the return of large-scale events to the city will boost numbers, particularly at the OVO Hydro. The supply of new hotels will continue to improve the city’s offering although in the short-term, will likely act as a weight on room pricing.
- Glasgow continues to see strong demand for manufacturing space, with new developments looking to take advantage of increased demand from advanced manufacturing companies – with the development at AMIDS being the prime example.
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Economy
Offices
Retail
Industrial
Residential
Economy
The Glasgow economy is expected to see 5.7% growth during 2022, above its pre-covid average of 1.4%. This like in many other cities will be driven by a rebound in accommodation and food services (28.8%), arts and entertainment (16.6%) and educations sectors (9.5%). Positively for the city, the professional and scientific sector is forecast to post significantly strong growth during the year – 6.3%, compared to a pre-covid ten-year average of 1.2%.
9,600 jobs are expected to be added to the job market, which would mean more people being employed in Glasgow than at any other time. Employment is expected to reach 449,000 jobs during the course of the year, with traditionally office-based jobs making up 3,700 of these roles. The unemployment rate is expected to fall from 7.3% in 2021 to 6.1% in 2022, although that would still leave the city above its pre-Covid level of 4.0%.
The city will see the advancement of the Avenues project during the course of the year, with Block A including Argyle Street due to complete during the course of the year, while work on Blocks B, C and D could all start during the course of the year.
GLASGOW DASHBOARD – ECONOMY
Offices
The ‘return to the office’ didn’t quite happen in Scotland, as continued guidance from the Scottish Government to work from home continued throughout 2021. This has continued to put a significant drag on occupier activity. With the majority of Glasgow’s workforce still at home, businesses have been unsurprisingly reluctant to commit to acquisition of office space until the Scottish Government signal a clear directive to return to the office. Demand is expected to rebound during 2022 as workers look to get back to the office to some extent.
While demand is thin at present and largely indigenous, the number of lease breaks that have occurred during the course of the last two years – and the willingness of landlords and occupiers to hold off decision making – is likely to create a significant amount of latent occupational demand. New demand is coming from R&D occupiers looking for quasi-office space, while the demand from small businesses for flex office space is likely to increase the provision across the market – with a number of high-profile operators looking at the city.
Additionally, occupiers with net zero carbon targets in the short-medium term are aware that they need to act sooner rather than later in order to acquire space that will help them fulfil their targets – with the Scottish Government looking at their own occupational portfolio as a result, which is now made easier due to the release of the Path to Net Zero guide released in 2021.
Cadworks, 2 Atlantic Square and 177 Bothwell Street all neared or reached completion in 2021, with the latter almost fully let. The public sector remains active, despite the work from home mandate, with Transport Scotland taking 48,000 sq ft at 177 Bothwell Street and the Student Loans Company pre-letting 75,000 sq ft at the Building Six, Buchanan Wharf. This sector is likely to remain very active in Glasgow during the course of the year and into 2023.
GLASGOW DASHBOARD – OFFICES
Retail, Hotels and Leisure
The expected increase in the resident population of Glasgow city centre over the next decade will help support some of the retail and leisure offering in the city. Nevertheless, in the short-term, Glasgow experiences the same problem a number of other cities have – an oversupply of retail space. However, the resilience of Glasgow’s prime retail pitch helps differentiate its retail space – while vacancy is 22% across all retail space, this reduces to just 6.8% for prime space. However, while we expect to see a number of other cities’ rental values plateau, we forecast that Glasgow will continue to see average rental values decrease by c.9% during the year. Large-scale regeneration projects including Candleriggs Square will continue to add retail, leisure and F&B offerings, while St Enoch’s offering is evolving to become much more leisure-focused.
COP 26 was a much-needed fillip for Glasgow hoteliers, with the city experiencing record breaking levels of performance. This gives confidence that the return of large-scale events to the city will boost numbers, particularly at the OVO Hydro. The supply of new hotels will continue to improve the city’s offering although in the short-term, will likely hamper the recovery of performance from the impacts of Covid-19. 2022 will see the opening of the Adagio, Clayton and a Virgin hotel, with more in the pipeline for 2023, emphasising continued investor interest in the city, with a great deal of capital looking to be placed in hotels.
However, with a number of major commercial developments across a range of sectors, including tech, advanced manufacturing and commercial offices, as well as the continued return of major conferences and events we believe Glasgow hotel performance will come back strongly, most likely returning to 2019 levels by late 2024.
GLASGOW DASHBOARD – RETAIL
Industrial
During 2021, take-up for big box space in the whole of Scotland was comparatively muted compared to other markets due to a lack of stock outside of Eurocentral. Demand continues to be limited by supply, with no available big box stock in the market. There is increasing demand for film studio space in Glasgow and across the city, off the back of the success of Pyramids Business Park in West Lothian – with London & Regional acquiring the asset in late 2021.
Frasers Property announced last year it was planning to speculatively develop a 133,000 sq ft multi-let industrial scheme at Hillington Park. The scheme is expected to comprise of 13 units, ranging from 5,000 sq ft to 25,000 sq ft. Also, Tritax Symmetry has agreed terms with publisher HarperCollins to develop a 550,000 sq ft warehouse relocation from Bishopbriggs to a new site near Nova Park, however the plans are at early stages with the relocation expected to complete in 2025.
There continues be activity in the mid-box market servicing the central belt. However, unlike the rest of the UK, rental growth is being driven by increasing land and build costs rather than the weight of demand. Glasgow continues to see strong demand for manufacturing space, with new developments looking to take advantage of increased demand from advanced manufacturing companies – with the development of AMIDS being the prime example the type of new space required.
GLASGOW DASHBOARD – INDUSTRIAL
Residential
Glasgow experienced strong house price growth in 2021, at 11.9% for the year, well ahead of the UK average. This is now a fairly long running trend, with Glasgow outperforming the wider UK over the last five years. As with other locations, properties and sub-markets in the city that reflect the pandemic reassessment of housing need – the ‘race for space’ have seen the most demand. We expect these trends to continue in 2022, with Glasgow continuing to show stronger growth than average and more spacious houses and areas with access to green space performing best. Despite this, there are still areas that have been left behind by regeneration and this is a key issue for the city but this also represents an opportunity to potential.
Glasgow has a significant Build to Rent pipeline with over half of Scotland’s total units. Investor appetite is good although sites in perceived marginal locations have struggled for interest. The city will benefit from the international profile-raising effect of COP26 and has a strong underlying demographic profile to support growth in the sector.
The outlook for investor demand for PBSA is strong. The city’s universities have reported good growth figures for student demand and supply has been limited over the last few years. The planning environment remains difficult for PBSA meaning supply will remain constrained for the foreseeable future. We expect to see yield compression in 2022 and strong competition on opportunities that come to market.
GLASGOW DASHBOARD – RESIDENTIAL
2022 Forecast Glasgow Digital Event
Watch our recent live event, where we brought together a series of experts to explore the key drivers and predictions for Glasgow and Edinburgh in the year ahead.
Broadcast Wednesday 2nd February
