The Scottish real estate industry contributes almost £4.8 billion to the Scottish economy and supports more than 92,000 jobs, according to a new report.
Compiled by the University of Strathclyde’s Fraser of Allander Institute under commission by the Scottish Property Federation (SPF), The economic contribution of the commercial property sector was unveiled today at the SPF’s annual conference in Edinburgh.
Among its findings is a comprehensive look at the potential economic impact of new commercial work. In total, the commercial property element of Scotland’s construction industry has a direct impact of around £2.4bn to Scotland’s economy, however taking into account the additional spill-over effects of the industry, commercial property is estimated to have a total impact of almost £4.8bn.
Combining FTE employment in construction and real estate activities, the report estimates that around 49,000 FTE jobs are directly supported by commercial property in Scotland, with the additional indirect and induced effects, helping to support total FTE employment of around 92,000.
The sector is an important source of tax revenue for both the Scottish and UK governments and is acknowledged as a barometer of economic activity; with the report’s authors stating that without high quality and effective commercial property there would be no business activity.
Despite this, however, the report also identifies a worrying lack of investable space with the amount of new commercial property being built in terms of square ft. smaller than a decade ago.
In 2009, new commercial property construction equated to 7.1 million sq ft but in 2017 the equivalent of only 1.6 million sq ft was constructed.
Similarly, whist the value of sales of commercial property have been increasing in recent years to £3.2 billion in 2016/17, this figure is still significantly lower than a decade ago.
The report goes on to show the potential for growth and concludes that for a £100m increase in new commercial property output, the economy benefits from a further £73m.
Taking a universal approach to the sector, it calculated that construction makes up around 65% of commercial new work (and 70% of total impacts from direct, indirect and induced effects). The other large contributors are from real estate and financial services who make up around 28% of the direct output of new commercial projects.
David Melhuish, director of the Scottish Property Federation, who commissioned the research, said: “Commercial property plays an important role in the Scottish economy and we welcome this excellent piece of research by the Fraser of Allander Institute.
“The industry has experienced challenging times in recent years due to the economic downturn and fragile levels of business and consumer confidence which has led to a dampening of growth. However this report highlights that the industry remains an important growth generator for the Scottish economy and that there are huge opportunities for the industry to grow as a valuable financial asset for investors which in turn will drive economic activity and important infrastructure in our cities and towns.
“We continue to work with the Scottish Government to look at the barriers which exist to attracting investment into the sector. One such area where more work is required is to ensure that Scotland increases its overall supply of Grade A office stock – a vital component in attracting businesses to locate or indeed remain in Scotland and continue to be important tax generators for the economy.”
Professor Graeme Roy, director of the Fraser of Allander Institute, added: “Our analysis shows that Scotland’s commercial property industry is an important barometer of economic activity, particularly in a service based economy such as Scotland.
“The latest data shows that the sector has been growing in recent years, but levels of activity remain down on where they were a decade ago.
“That being said, our analysis demonstrates that the sector continues to make an important contribution to the Scottish economy. This is not only through the direct economic activity that the commercial property sector supports but also the wider spill-over effects benefiting businesses throughout Scotland.”