Aberdeen’s property market has suffered severe trauma in terms of falling demand and values following the oil price collapse.
One thing we have learned from oil price corrections over the past 35 years is that it is all about supply versus demand, with a large sprinkle of sentiment.
Let’s look at the reality. There have been thousands of jobs lost in the energy industry, which has now trickled through to most, if not all, the service sectors. I suspect there are very few businesses or households in Aberdeen who have not been adversely affected.
Fewer jobs means fewer people; fewer desk spaces; fewer hotel rooms required; fewer tenants for all types of property from flats and houses to offices and industrial units.
Commercial property rents and capital values have fallen and incentives to tenants have increased hugely.
Office and industrial property supply is at an all-time high. Office take-up has doubled year-on-year to more than 400,000sq ft. Investment in Aberdeen city and shire has increased by an incredible 536%, from £19million to more than £121million, while industrial lettings have also been reasonably strong this year at just over 400,000sq ft.
It is our view that while the oil price has had a strong steady rise over the past 30 months, the property market always lags it by between 12 and 24 months. We probably have a little more pain to endure over the next 12 months but we can see the signs of recovery.
Whatever anyone thinks about the design and financing of Marishcal Square, I believe this exciting development shows we are a forward-looking city.
Development creates jobs, council tax and business rates, but most importantly will give the perception that Aberdeen really is open for business.
Eric Shearer, partner and head of the Aberdeen office at Knight Frank
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