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ISSUE 11 SEPTEMBER 2018 FGBUR NETT.CO.UK

INSIDE THIS ISSUE The Billion-Pound Growth Industry Building on Success Half-year Update The Art and Science of Property Valuation – The Future

In this edition of Property Matters we feature a half year update on the Aberdeen office market which gives cause for encouragement as we continue through 2018. On this theme, our cover photo is of the FG Burnett office at 33 Albyn Place, where we are about to welcome new neighbours. We are delighted to have Chris Foy, CEO of Visit Aberdeenshire as our guest contributor this issue together with articles from our Property Management,

Building Consultancy, Agency, Rating and Valuation Departments. We hope you enjoy reading this latest edition and if we can assist you on Commercial Property Matters then please do not hesitate to contact us.


ISSUE 11 SEPTEMBER 2018

Welcome WIDENING INFLUENCE As always, Property Matters illustrates the wide range of services we provide to clients, our influence is also widening geographically, well beyond our ‘heartland’ of North-East Scotland; this issue Jim Johnstone discusses his project management role for client, Chrysaor in relation to their London office whilst we also announce retail deals in Glasgow and Dundee. Staying with the theme of geographical spread, I am delighted that we have been appointed by British Red Cross to provide a range of commercial property services across Scotland. This will include advice in relation to acquisitions, disposals, rent review and lease renewals. Our role will also see us provide valuation and rating advice on an ‘as required’ basis. Even as Property Matters goes to print, we have just completed a regear on a Burger King in Stirling, have secured rent review instructions for industrial units in Glasgow and have completed a further letting at the prestigious 100 Queen Street, Glasgow development – we require to be mobile to meet our clients’ expectations. GAME CHANGER We are fortunate to attract quality guest contributors to Property Matters, this edition Chris Foy CEO of VisitAberdeenshire clearly sets out his organisation’s vision for our tourist industry going forward. There are a number of areas which give cause for optimism but witnessing the “arrival” of TECA on journeys to and from the Airport is the most exciting for me – a real ‘game changer’ in relation to what the city

can pitch for in terms of conferences, exhibitions, concerts and events. COUNTESSWELLS APPOINTMENT Countesswells is a new town in the western suburbs of Aberdeen that will eventually comprise 3,000 homes, two primary schools and an academy, community facilities, retail and businesses, alongside civic spaces and a mix of landscaped and informal green space for around 7,000 people on a 400 acre site. We are delighted to have been appointed to the panel of property advisors for this key project. There will be two main mixed-use neighbourhood centres with retail and commercial opportunities for FG Burnett to work with the client on bringing forward and delivering. Countesswells occupies a unique location and will evolve into a successful sustainable community with its own character and identity where people can live, work and play. To play a part in delivering that is exciting. Richard Noble, Managing Director richard.noble@fgburnett.co.uk

SILVER SUCCESS FOR FG BURNETT FG Burnett is celebrating after achieving Silver accreditation for the Investors in People (IIP) standard for the next three years. Following a robust assessment, the company achieved excellent performance levels by meeting additional evidence requirements to secure Silver accreditation, a level of recognition which is held by only 15% of IIP accredited organisations. The assessor found that among FG Burnett’s strengths were openness and transparency in the way the company works, learning and development opportunities, a strong sense of pride in being a part of the FGB team, a culture of mutual support and a number of well-established organisational practices in place. Richard Noble, said: “I am delighted we have received this prestigious Silver accreditation for the Investors in People standard. Silver is a fantastic achievement for all of the FG Burnett team and it is their continued hard work and dedication that has made this possible.”

PROMOTION FOR IONA FOUBISTER FG Burnett team member, Iona Foubister, is due congratulations following her promotion to Senior Building Surveyor. Iona has been with the company since 2013, when she joined as Graduate Building Surveyor and subsequently qualified as a Chartered Building Surveyor in 2015. The promotion is a direct recognition of Iona’s valued contribution to the Building Consultancy Department together with being an integral part of the introduction and growth of the company’s EPC/ Commercial Energy Assessment service.

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THE BILLION-POUND GROWTH INDUSTRY

Convention and Events Bureau. These combined developments will strengthen our ability to cope with the demands of the current and emerging market trends which will help broaden the appeal of the North-east to a worldwide audience, acting as a catalyst to attract more visitors to the region. EVENTS AND FESTIVALS

BIG RESULTS REQUIRE BIG AMBITION The North-east tourism sector is radically evolving, and our small corner of Scotland, which in the past has been largely forgotten in favour for Edinburgh and Inverness, is now being firmly placed on the map as a holiday destination of choice. Our region has much to offer visitors thanks to our rich heritage, stunning scenery and some of the best food and drink of anywhere in the world. It is these assets which will collectively help us to attract more visitors to the region and achieve our target of growing the North-east visitor spend to £1billion per annum by the year 2023. TAKING THE LEAD That is our bold ambition as the lead tourism agency for Aberdeen and Aberdeenshire. We’ll do this by working in partnership with many businesses and agencies to promote our fantastic visitor experiences in North-east Scotland to targeted audiences in the UK and overseas. We work to develop the visitor economy through initiatives that help tourism businesses to understand and meet demand from an ever-changing market to strengthen the region’s position as a world-class tourism destination. THE PLAN As a visitor destination, the opportunity we have to grow is enormous, but to realise this significant growth potential it is important that businesses of all sizes collaborate, as we all have a stake in the future of tourism in the North-east. In March a new destination strategy was launched which outlined how best we can work together to achieve our shared agenda of increasing the visitor economy. The strategy outlined how businesses can

feed into key areas of growth including the new convention centre, The Event Complex Aberdeen (TECA), which will be one of the largest event spaces in the country, as well as the new South Harbour development which will attract large cruise ships to the region for the first time. CRUISE The North-east of Scotland has been described as one of the last great, untapped cruise destinations in the UK, and when the South Harbour is complete in 2020, it will allow Aberdeen to attract a greater share of an industry which adds £100million to the Scottish economy annually. The region will soon welcome as many as 3,250 passengers per ship, eager to explore what the North-east corner of Scotland has to offer through organised and independent excursions. The cruise market has the potential to be a game-changer for the region, and VisitAberdeenshire is committed to maximise the opportunity. Earlier this year we appointed a dedicated cruise project manager to help shape the experience and ensure the destination is cruise ship ready. BUSINESS EVENTS The all new convention and events centre, TECA, is the largest ever single investment in a venue in the UK and will transform the country’s event’s industry. Opening in 2019, Aberdeen City Council’s £333million investment will deliver a convention centre with 47,000 square meters of event space and the capacity to accommodate up to 12,500 people. The investment in The Event Complex Aberdeen is complemented by the formation of a dedicated business events resource in the Aberdeen

Events and festivals are a lever to promote our region, and we’re fortunate to have an inspiring collection of events throughout the year which offer unique experiences to those who visit us. Our thriving festival and events calendar translates into a thousand languages and has the ability to create a memorable immersive experience for our visitors. We benefit from visionary minds that curate ideas, and support from the Aberdeen City Council, Aberdeenshire Council, Aberdeen Inspired and the business community help to bring these ideas to life. The benefits of this thriving cultural sector are far reaching as they provide local traders with new audiences among the huge crowds that are drawn into the city. In February this year, the night sky above Aberdeen enveloped the bright lights and laser lightshows of the Spectra festival of light. The four-day event attracted a record audience of 96,000; a year on year increase of 30,000. These year-round events present businesses with a golden opportunity to capitalise on what is traditionally an off-peak shoulder period for visitor facing businesses. THE FUTURE LOOKS BRIGHT The global appeal to visit Scotland is at a high, and indications suggest this trend will continue with ongoing route developments strengthening our connectivity to the rest of the world. And unlike many other Scottish locations that physically cannot accommodate any more visitors, we have the space, capacity and strategy to grow without compromising on the quality of a warm Scottish welcome. Chris Foy, Chief Executive Officer VisitAberdeenshire INDUSTRY.VISIT ABDN.COM

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ISSUE 11 SEPTEMBER 2018

KEEPING YOUR COOL The prolonged warm weather this summer has focussed minds on ensuring how working conditions inside business space can be kept to a comfortable temperature. Many offices these days have some form of arrangement for ventilation. This could be as simple as an open window but often business space will have some form of mechanical ventilation whereby the building has a fan system which blows fresh air into the interior of the building. Building Regulations set a minimum volume of air change measured by litres of air per person per second and the building’s plant would be designed to achieve this. The effect is to slightly over pressurise the interior space so that an air exchange takes place by the incoming air pushing out stale air. Such air-handling units will usually have an electric heating battery to warm up the air as it is drawn into the building so that in the depths of winter icy blasts are not being directed onto the workforce! Conversely, some buildings may operate an air extraction system whereby the reverse of this is found; by having extract fans running, a slight negative pressure is created within the building causing fresh air to be drawn in by infiltration through windows and doors and thus achieve the air change this way. As buildings become increasingly sophisticated then an element of airconditioning can take place. It is quite common to associate air-conditioning

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with only a cooling element but the true air conditioned system will also be able to deliver warm air to the business space. Older systems that provided both heating and cooling would have relied upon a separate chiller to provide cooling, together with a boiler when heating is called for. However, more up-to-date installations simply rely on a single item of plant to provide both heating and cooling. These tend to be known as VRV systems (standing for Variable Refrigerant Volume) although this strictly speaking is a term trademarked by Daikin who are one of several leading manufacturers in this sector. Generically they are referred to as VRF (Variable Refrigerant Flow). The environmental impact of air conditioning is firmly in the public eye and there is an increasing legislative environment particularly on the use of refrigerant gasses, some of the older types of which have been banned due to their deleterious effect on the environment. As a result of this many building designers are looking at alternatives to large capital investments in plant. This not only reduces both the initial capital outlay but also expensive ongoing costs particularly in electricity consumed and ongoing maintenance repair and insurance charges.

“AS PROPERTY MANAGER, THE CORRECT AND UNINTERRUPTED OPERATION OF ALL THESE SYSTEMS NEEDS CAREFUL AND WELL PLANNED OUT MAINTENANCE.” CHRISTOPHER YANNAGHAS

As Property Manager, the correct and uninterrupted operation of all these systems needs careful and well planned out maintenance. A dependable contractor needs to be identified and carefully supervised so that they work methodically and allocate sufficient time to ensure that all elements of the system are properly maintained. It can be appreciated that the more sophisticated the system the more extensive the planned maintenance regime needs to be. For more information on assistance in running plant and machinery in your property please contact either Christopher Yannaghas on 01224 597510, Holly Wyatt on 01224 597513, or Freya Eardley on 01224 597508.


BUILDING ON SUCCESS Following the successful Project Monitoring works undertaken by FG Burnett’s Building Consultancy Department within The Capitol Building in Aberdeen for Chyrsaor E&P Services Limited, the client approached us to undertake a similar role during their planned expansion in London. Chrysaor had held preliminary talks with their Landlord via a London Agent and had identified that a whole floor (14,000 sq.ft) within their current building in Covent Garden would shortly become available. Whilst negotiations commenced in the background, our client had approached a number of Design & Build Contractors who were invited to inspect the offices in Aberdeen with a view to replicating the specification whilst adapting the design to suit the work streams offered from their London Base. The proposals were evaluated following presentations by the companies

involved with FG Burnett becoming heavily involved in reviewing the proposals to ensure that the brief had been followed, the design matched that of Aberdeen, where applicable, and the costs were both realistic and inclusive of all that was required for the business to operate. With the chosen contractor agreed upon they were appointed by the client and began developing their detailed design and construction programme. A start on site was achieved in late April 2018 with an 11 week construction programme being agreed upon. FG Burnett undertook regular site visits to ensure the works were in line with the programme and achieved the desired quality. In addition, the site visits were used to agree stage payments throughout the project. FG Burnett was also available to dial into the weekly client meetings held on site. Being a fit out of an existing building, some elements of the design had to be adapted slightly following the

“ULTIMATELY, THE PROJECT WAS BROUGHT IN ON BUDGET AND VIEWED AS A SUCCESS – THE CLIENT BEING DELIGHTED WITH THEIR NEW WORKING ENVIRONMENT.” JIM JOHNSTONE

down takings exercise to remove the former tenants fit-out. All parties worked swiftly and with co-operation to agree the best way forward and assess the impact on time and budget. Ultimately, the project was brought in on budget and viewed as a success – the client being delighted with their new working environment. Jim Johnstone jim.johnstone@fgburnett.co.uk

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ISSUE 11 SEPTEMBER 2018

THERE ARE ALWAYS TWO SIDES TO A DEAL!! It is more often the case than not that sellers and landlords have surveyors or consultants manage a transaction from inception to completion with a view to protecting their client’s interests at all stages. What may be surprising to many is how many times a buyer or tenant is commercially unrepresented in these transactions!? The answer is not as often as you might think provoking the supplementary question, why should this be? Well it could be many things ranging from an individual or company’s desire not to disclose its identity which by necessity, reveals to the world you have a requirement, to the spectre of having to pay a fee for, in some people’s minds, a professional service which lacks real value, to the folly of believing that with the benefit of modern day digital platforms, a lay person can negotiate a better or at least, as good a deal as a professional. The clever thing to remember is that the market is a dynamic thing, constantly

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evolving in response to subtle or even material changes in, by way of example, the demand and supply equation. In Aberdeen terms, yes, everyone knows there has been a downturn in the energy sector which in turn has led to a softening in demand for commercial property but by how much and have all sectors been affected to the same extent? These are things that a professional knows, is best placed to advise upon and that knowledge and experience can be applied to the benefit of their clients eg lower rents or prices, greater incentives and the delivery thereof, greater flexibility in lease terms. And don’t forget, with legal and compliance requirements these days, acquiring a commercial property is a complex affair, more often than not involving commercial advice, extending to searching for facilities, negotiating and agreeing Heads of Terms and liaising with solicitors relative to lease terms together with building surveying advice extending but not necessarily limited to building pathology, Schedules of Condition, refurbishment and, not least these days, energy performance. Valuation advice may also be required.

Even post acquisition, advice may very well be required relative to local authority rates and rating appeals, where ongoing cost savings may be available. To be fair, it could be the case that surveyors and consultants are as much to blame because despite improving efforts, they still don’t market themselves or highlight just how much their skill, knowledge and experience can add to the value of their client’s interests. This article hopefully serves as a step change in that direction. FG Burnett are a multi-disciplinary practice who can offer a one stop shop to clients be they global companies or local individuals, managing the acquisition of commercial property from inception, through search and negotiation, diligence, acquisition and refurbishment to post acquisition tasks including rating appeals, rent reviews, bank or accounts valuations, management or specific facilities management. Graeme Watt graeme.watt@fgburnett.co.uk


HALF-YEAR UPDATE Aberdeen Office Market At the time of going to print, we’ve hit the half way point in 2018, the oil price has been in excess of $70 per barrel since Christmas, and there seems to be sustained optimism in the local economy, whether buoyed by a lengthy period of Mediterranean weather or something more substantive remains to be seen. The office market is however a good barometer of how Aberdeen performs as a whole. As previously reported, the oil price and office market rise and fall hand in hand, there usually being a lag between increases in the former having a similar effect on the latter. It is clear that the oil price has been on an upward trend for the past 12 months, but has the office market started to react? It appears that is has!! 2017 saw a total of 50 office transactions, ranging from the very small 500 sq.ft lettings up to significant HQ move for Total. The average letting size overall was in the region of 7,500 sq.ft, albeit skewed by the Total deal which was in excess of 130,000 sq.ft. Removing this from the equation, the average letting size was in the region of 4,000 sq.ft. So how has H1 2018 compared? Statistics show that in the first 2 quarters of 2018 there have been the same number of office lettings as there were in the whole of 2017 and comparative take up figures can be shown in the table below.

Quarter

2017 Deals

2017 Take Up (sq.ft)

2018 Deals

2018 Take Up (sq.ft)

Q1

14

181,885

22

88,774

Q2

16

58,849

28

89,776

Q3

15

86,880

?

?

Q4

6

26,742

?

?

Total

51

354,356

50

178,550

“THERE IS NO ROOM FOR COMPLACENCY HOWEVER, AND WHILST OIL PRICING WOULD APPEAR TO BE PRICED AT A LEVEL WHICH ENCOURAGES ACTIVITY, THERE IS NO DOUBT THAT IT WILL TAKE A CONSIDERABLE AMOUNT OF TIME TO START MAKING ANY SIGNIFICANT DENT IN THE CURRENT STOCK”

2018 has not had the large HQ transactions of the previous year….yet…..and it remains to be seen what the rest of the year will bring. M&A activity and asset purchases may well give rise to requirements and there is optimism that the transactional activity evidenced in Q1 and Q2 will continue throughout the rest of the year and for the short to medium term. What is evident however is that the cautious optimism in the energy sector now appears to be filtering through to office demand. FG Burnett has benefitted from this increased activity. In 2017, FGB were directly involved in 17 of the 51 transactions, 33%, albeit in terms of area transacted, this was 195,777 sq.ft – 55% of the total take up for 2017. In H1 2018, FGB has been involved in 21 of the 50 transactions – 42% and 55,000 sq.ft – 30.8% of total area transacted. There is no room for complacency however, and whilst oil pricing would appear to be priced at a level which encourages activity, there is no doubt that it will take a considerable amount of time to start making any significant dent in the current stock, but the stats from Q1 and Q2 would provide encouragement that there is light at the end of the tunnel. Graeme Nisbet graeme.nisbet@fgburnett.co.uk Jonathan Nesbitt jonathan.nesbitt@fgburnett.co.uk

The figures show encouragement insofar as there has been a marked increase in activity in terms of office transactions in Q1 and Q2 2018 and it is interesting to note that total area transacted is almost identical for each quarter in 2018. If the Total deal is removed from the Q1 2017 figures, then take up in 2018 is up by 57% in Q1 and 75% in Q2. Similarly, the area transacted is up 75% and 52% respectively, The average letting size has reduced to c. 3,500 sq.ft but this is not dissimilar to the previous year excluding the Total letting in Q1, which skews the figures. FGBUR NETT.CO.UK

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HALF-YEAR UPDATE

4-5 Golden Square

Deals Done

Unit 29 Abercrombie Court - April 2018

The Silver Fin

Suite K2 - May 2018 New Lease / 257 sq.ft / Landlord: Granite City Investments Limited / Tenant: Logezy FG Burnett represented the landlord

6th Floor – June 2018 New Lease / Part of 6th floor / 3,161 sq.ft Landlord: British Airways Pension Trustees Ltd / Tenant: Barclays / FG Burnett represented the Landlord

Suite G1 – March 2018 New Licence / 581 sq.ft / Landlord: Granite City Investments Limited / Tenant: Kier Construction / FG Burnett represented the landlord

33 Albyn Lane – April 2018

Westhill Shopping Centre – February 2018

17 Albert Street – May 2018 Suite 3 – New Lease / 669 sq.ft Landlord: St James’s Place Property Unit Trust / Tenant: Paramount Care (Aberdeen) Ltd / FG Burnett represented the landlord

7th Floor – April 2018 New Lease / Part of 7th floor / 4,187 sq.ft Landlord: British Airways Pension Trustees Ltd / Tenant: CATS Management / FG Burnett represented the landlord as joint agent 8th Floor – June 2018 New Lease / Part of 8th floor / 6,100 sq.ft Landlord: British Airways Pension Trustees Tenant: Verus Petroleum UK / FG Burnett represented the tenant

New Licence / 2,500 sq.ft / Landlord: RB Farquhar Pension Fund / Tenant: Deep Ocean / FG Burnett represented the landlord

Sale / 2,029 sq.ft / Seller: ABMAC Investments / Purchaser: Pan-Ocean Engineering Limited Directors Pension Scheme / FG Burnett represented the seller

Caledonia House – February 2018

68 Spademill Lane – June 2018 New Sub-Lease / 8,777 sq.ft / Head-tenant: Wood / Sub-tenant: Anasuria / Ping Petroleum / FG Burnett represented the head tenant

68 Queens Road – March 2018 New Lease / 1,007 sq.ft / Landlord: Shortday Ltd / Tenant: Health Sure Group FG Burnett acted on behalf of the landlord

21 Mid Stocket Road – May 2018

New Lease / 1,867 sq.ft / Landlord: A&J Robertson (Granite) Ltd / Tenant: Hutcheon Mearns Ltd / FG Burnett represented the landlord

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New Lease / 546 sq.ft / Landlord: Ardroil Investment Company Limited / Tenant: Redmac Developments Ltd / FG Burnett represented the landlord

Unit 26 Abercrombie Court – January 2018

New Lease / 1,178 sq.ft / Landlord: Planit Property Ltd / Tenant: Atalas UK Ltd FG Burnett represented the landlord

Sale / 3,172 sq.ft / Seller: Ardroil Investment Company Ltd / Purchaser: 4MS Network Solutions / FG Burnett represented the landlord


H1 Hill of Rubislaw – June 2018

New lease / 7,300 sq.ft / Landlord: Jupiter Marathon Ltd / Tenant: Serica / FG Burnett represented the tenant

2A Rose Street – February 2018

New Lease / 279 sq.ft / Landlord: Private Individual / Tenant: A Alterations FG Burnett represented the landlord

16 Albert Street - June 2018

Sale / 2,043 sq.ft / Seller: Fountainhall Properties / Purchaser: MacLeod & Jordan FG Burnett represented the landlord

Glover Pavilion – February 2018

New Lease / 4,479 sq.ft / Landlord: London and Scottish Investment / Tenant: IX Blue FG Burnett represented the landlord

33 Albyn Place – July 2018

New Lease / 4,652 sq.ft / Landlord: Shortday Ltd / Tenant: Central Investment Services (Aberdeen) Ltd / FG Burnett represented the landlord

A WORTHWHILE EXERCISE It has been well documented that Aberdeen has suffered one of the longest and deepest downturns in recent years. “Cutting off the fat” has been a commonly used phrase; well suited to describe the tightening of operational costs in order to protect the bottom line. Against this challenging environment, businesses in Aberdeen have been scrutinising their property portfolios and within that context their business rates liability; arguably, more so than they have ever done before. The last general revaluation occurred in 2010, at a time when Aberdeen was fairly buoyant, distinct from the remainder of the UK which was 2 years into a general recession. Whilst ripples of the recession had been felt, it was largely business as usual in Aberdeen and its surroundings due to the oil and gas industry which proved to be relatively autonomous. From that time, the local economy continued on an upward trajectory of growth which, with hindsight, played a large part in what has been the perfect storm. Many occupiers now operating in a challenging climate, are expected to pay rates bills calculated on rateable values set in and around the peak of the local market in early 2015. Whilst there have been some very significant uplifts in rateable value, some locations and sectors have seen little or no growth in rateable value since 2010. Despite this, we continued to recommend that appeals should be lodged as part of an auditing exercise as we believe that it is sensible to examine values when there is any opportunity to do so. As we progress through the first few citations lists for the 2017 revaluation, which in Grampian have largely been the retail sector, our auditing exercise has already proved to be beneficial to a number of clients; PATRICK RITCHIE OF SIGNATURE MENSWEAR SAW THE 2017 BUSINESS RATES REVALUATION AS AN OPPORTUNITY TO ENSURE THAT HIS ASSESSMENT WAS CORRECT. THE RESULT WAS A REDUCTION IN RATES PAYABLE: “MY BUSINESS RATES LIABILITY HAD

INCREASED SIGNIFICANTLY AT THE 2017 REVALUATION. THIS, PROVIDED WITH A VERY CHALLENGING RETAIL CLIMATE, MOTIVATED ME TO TAKE ON BOARD MOIRA GORDON’S RECOMMENDATIONS TO LODGE AN APPEAL. HAVING DONE SO, I HAVE GOT 25% OFF MY ANNUAL RATES BILL. I AM VERY PLEASED WITH THE OUTCOME AND THE SAVINGS WILL ONLY GO TO ASSIST MATTERS GOING FORWARD WITH OUR CONTINUING TRADING PRESENCE ON UNION STREET.” PATRICK RITCHIE, SIGNATURE

“IT HAS BEEN AN ESPECIALLY TOUGH ENVIRONMENT FOR SMALL BUSINESSES IN RECENT YEARS, MAKING IT EVEN TOUGHER WHEN THE BUSINESS RATES INCREASED BY HIGH PERCENTAGES IN APRIL 2017. I TURNED TO FG BURNETT TO HELP IN MY RATES APPEAL AND COULD NOT HAVE BEEN MORE DELIGHTED WHEN THE RESULT WAS A POSITIVE OUTCOME, COMPLETELY OVERTURNING MY BUSINESS RATES LIABILITY.” MICHELE ROSS, THE YOGA SPOT

Our experience thus far with the disposal of 2017 business rates appeals would tend to reinforce our continuing belief that taking any opportunity to audit your rateable value is worthwhile. Whilst it is just that; an auditing exercise, not only can it provide peace of mind that what you are paying is correct, it provides opportunities to make significant savings in rates payable and emphasises the importance of continuous business rates management. As part of our service at FG Burnett, we are well positioned to identify these opportunities, and provide recommendations in order that your business rates are mitigated as much as possible. For further advice regarding rates relief and any other business rates issues, please contact moira.gordon @fgburnett.co.uk

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THE ART AND SCIENCE OF PROPERTY VALUATION – THE FUTURE Property valuation is neither an art nor a science but an amalgam of the two with the property valuer requiring not only analytical skills but also professional knowledge and expertise to arrive at an accurate valuation. It could be argued that this approach is now being challenged due to the technological advancements that have been made in society over the past two decades – together with the anticipated further advances in the future. Accordingly, the question that needs to be asked is will the professional human element that has so far been brought to bear in property valuation be replaced by artificial intelligence and “Big Data”? Most valuations are prepared by way of the Comparable Method whereby sales and letting are assimilated and analysed by the valuer. Ideally, these transactions should be similar in terms of use, size, specification, condition and location to the property being valued, together with being relevant to the date of valuation thus reflective of the prevailing market conditions at the time of valuation. In the past, this evidence was recorded and held as paper records which has now been superseded by being stored electronically both by individual property consultancies and large Real Estate Data and Analytics firms such as CoStar and Estates Gazette. Once the comparable evidence has been analysed, it requires to be synthesised by the valuer in order to arrive at his or her professional judgement of value. Accordingly, it is argued that our analytical processes are scientific in nature while the synthesis of that

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information is more akin to an art and/ or human professional subjectivity, as in many cases, the comparable evidence is inconsistent in nature and different property valuers will put greater or lesser weight on such evidence in arriving at the value of an interest. It has commonly been accepted that there is an element of valuation tolerance within the parameters of a valuation and while a valuation may not be 100% accurate it is, equally, not negligent. With the advancement of technology and the availability and quality of data it is argued that these parameters should be narrowed and lead to a higher degree of accuracy. Further, it has always been accepted that property markets will fluctuate but that pace of change now tends to occur more rapidly as there is a greater flow of data and reaction times have shortened accordingly. Thus, while a valuer should never be ahead of the market, they should to be no more than half a step behind. There is much talk with regard to the advancement of AI and Blockchains in many spheres of modern life including the building of motor vehicles, driverless cars, finance and the ordering and delivery of many day- to-day retail goods. Indeed, a variety of Autonomous

Valuation Models (AVMs) have been used for the valuation of both residential and commercial property for a number of years and today there’s a higher expectation and greater reliance on AVMs and Big Data in the property valuation process. It is believed that many types of commercial property including offices, industrial and retail can and should be valued by robust AVMs at least at portfolio level where is has proved to be more accurate. There are a number of reasons for property to be valued including acquisition, disposal, secured lending, accounts, taxation, rent review, rating and compulsory purchase. Therefore there is normally at least one good reason for a valuation being instructed and while it is almost a given that the provision of property valuations in the future will rely even more on the use of modern technology, particularly at portfolio level, we are of the view that however sophisticated AVMs may become, there is will be no substitute for the rationale applied to a valuation by an experienced Chartered Valuation Surveyor. To find out more about our Valuation Service, contact graeme.watt@fgburnett.co.uk or sara.mathieson@fgburnett.co.uk


RETAIL PROPERTY FOCUS Esson Properties Secure Tesco in Glasgow City Centre TJ Hughes to Anchor Wellgate Shopping Centre, Dundee On behalf of a private investor, FG Burnett have acted as joint agents to secure a letting to TJ Hughes at Wellgate Shopping Centre, Dundee. The Liverpool based discount department store which has been in existence since 1925 has agreed to a new 15 year lease on a 53,888 sq.ft (5,006 sq.m) retail unit, located at the main entrance to the centre. The flagship letting comes quickly on the back of agreeing a new lease with the discount gym operator, Xercise4Less, which has taken 31,000 sq.ft (2,880 sq.m) on the second floor on a 12 year lease. It is anticipated that TJ Hughes will be open for trade in October. TJ Hughes will occupy the former BHS store at the front of the Wellgate and will significantly improve the profile of the centre as well as drive substantial levels of footfall. Other retailers at Wellgate include B&M, Holland & Barrett, Home Bargains, New Look, The Entertainer and Iceland.

Esson Properties have let a further Unit within their prestigious 100 Queen Street office and retail scheme. Tesco have taken a ground floor and basement unit extending to 4,713 sq.ft on the basis of a new 15 year lease. FG Burnett acted on behalf of the landlord. Hunter Esson, Managing Director at Esson Properties commented: “We are delighted to add Tesco to a fine tenant line up at 100 Queen Street. When retailers experience difficult trading conditions, location is paramount and this is a building that keeps on delivering”. Tony McElroy, Tesco Head of Communications in Scotland said: “We are always looking for new opportunities to serve customers; and customers tell us they really value the convenience of our Tesco Express stores in handy Glasgow

FG Burnett Delivers in a Challenging Market FG Burnett is delighted to have advised on the sale of two Peterhead properties. The former Millennium Health and Leisure Centre on St. Andrew Street has been sold to well-known local business George Donald (Warehouseman) Ltd. The property was brought to the market in November 2017 with the sale completing in June. Located below the town’s newly opened Travel Lodge, 14 Chapel Street was sold to an established local retailer who plan to expand their existing Chapel Street baby and children’s clothing operation. David Henderson, commented,” we are pleased that the sales of these two properties completed in what was a reasonably short period of time given

City Centre locations. Only last month an economic report showed Tesco was contributing over £234m per year to the Glasgow economy and a new store on Queen Street will continue to add to this.” FG Burnett Managing Director, Richard Noble added “We are very pleased to have secured Tesco as the tenant for Unit 4 of the scheme. We now have only one unit remaining, located on Ingram Street. Interest in this development has been really healthy given the quality of the units and the development’s location close to Royal Exchange Square, Buchanan Street and Argyll Street.” the relative market challenges that exist both locally but also at a national level as consumer retail habits are changing. These property sales, along with other recent commercial transactions in Peterhead town centre show that demand exists.”

Richard Noble richard.noble@fgburnett.co.uk 01224 597528 David Henderson david.henderson@fgburnett.co.uk 01224 597538

GET IN TOUCH We hope you enjoyed the latest edition of Property Matters and would love to hear your thoughts or suggestions for future articles. At FG Burnett we are passionate about sharing our knowledge and are always keen to learn more, so if you would be interested in joining our business to business knowledge sharing CPD programme then please contact Karen Ross - karen.ross@fgburnett.co.uk

FGBUR NETT.CO.UK

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Property Matters Issue 11, September 2018  

Property Matters Issue 11, September 2018

Property Matters Issue 11, September 2018  

Property Matters Issue 11, September 2018

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