On balance, Scottish respondents said that there were fewer enquiries from investors in Q1, with the office and retail sectors both reported to have seen falls in investor demand and the industrial sector seeing a marginal rise.

Occupier demand was reported to have been flat, marking the first time since Q4 2022 that this net balance hasn’t been in positive territory. Looking at the subsectors, there was a significant divergence between the industrial sector on the one hand and office and retail on the other, with occupier demand for industrial space continuing to increase according to the balance of respondents, office demand broadly flat, and retail demand said to have fallen.

Looking ahead, respondents in Scotland expect commercial property capital values to edge lower over the next quarter due to the impact of the geopolitical tensions, with the net balances for both office and retail now in negative territory and the net balance for industrial space having eased back.

Expectations for rents are more positive. A net balance of +10% of respondents said that they expect rents to rise over the three months ahead at an all sector level. However, there is again a big divergence between the subsectors. Respondents on balance expect industrial and office rents to rise over the next three months and retail rents to fall.

Survey contributor David Smart of J Smart & Co. (Contractors) PLC in Edinburgh said: “We are still seeing rental growth in industrial in the Central Belt of Scotland, although this is mainly due to lack of stock. We are starting to see vacancies on our office properties for a number of reasons. There is a significant concern about the UK economy and the impact of Middle East tensions on construction costs, inflation, and tenant confidence.”

Commenting on the UK picture, RICS head of market research & Analysis, Tarrant Parsons, said: “The occupier side of the commercial property market has, to date, shown little visible impact from the increasingly difficult global geopolitical environment, with survey indicators tracking demand levels, availability and rental expectations largely unchanged since late last year.

“However, the negative macroeconomic consequences of the conflict in the Middle East are evident in the investment market, most notably through tighter credit conditions and growing caution around near term capital values. This is weighing on confidence just as the market had begun to display tentative signs of recovery.

“Whether this represents a short term interruption or the beginning of a more prolonged slowdown will depend on how quickly the current disruption across global energy markets begins to ease.”