Edinburgh and Glasgow are well-positioned to thrive over both the short and long term with key growth sectors offering major contracts.
- Edinburgh’s zonal focus
- St James leads the charge
- Glasgow at vanguard of Scottish upturn
- Shopping potential
- Infrastructure now and later
With nearly 100 schemes either under construction or in the pipeline in two of Scotland’s major cities there’s plenty of work to be won.
So what work can contractors expect in Edinburgh and Glasgow in the months ahead?
According to the latest development pipeline report by property advisers GVA, shared exclusively with Construction News, both cities are set for significant growth.
Edinburgh’s zonal focus
“The most notable addition to Edinburgh has been the tram network from York Place to the airport,” GVA senior director Keith Aitken says.
Now fully operational, Mr Aitken says it transported 90,000 customers a week this summer and will in time begin to spur development in the city’s Haymarket area in the west and in the east end of the city around St Andrew Square and the St James Centre.
Large-scale development activity along Edinburgh’s major thoroughfare, Princes Street, has been limited to date, however, along with activity in the city’s ‘golden rectangle’ area.
“Only one office development [has been] completed on Charlotte Square [close to Princes Street],” Mr Aitken says.
“Our main message is that Edinburgh is open for business”
Sue Bruce, Edinburgh Council
But there have been three recent sales of existing or vacant office buildings in the area, which have been acquired for changes of use into either hotels or serviced apartments.
Edinburgh council chief executive Sue Bruce tells Construction News the city has four strategic areas of growth: the city centre, south-east Edinburgh, Edinburgh waterfront and west Edinburgh.
The council is looking to “drive forward” 12 sites in these areas, Ms Bruce explains, with the council keen to enable “as much development as possible”.
Edinburgh is “heavily reliant” on its services sector, Ms Bruce says, with demand from its large financial sector as well as strong life sciences within its BioQuarter in the south-east of the city.
“Our main message is that Edinburgh is open for business,” she says.
St James leads the charge
A major project set to come through in the retail sector is TIAA Henderson Real Estate’s £850m St James shopping centre.
TH Real Estate aims to tender a series of construction contracts collectively worth around £400m for the scheme, which will include demolition and enabling work contracts to be let in Q4 2014.
A main contractor contract will be out in June 2015, with plans to be on site in 2015 and for the centre to open in 2019.
Click on map to enlarge
According to Mr Aitken, there is no dominant development company in the Edinburgh market, but the scale of the main developments all have significant end values of between £100m and £850m.
Active developers include Tiger Developments and Interserve at Haymarket, TIAA Henderson Real Estate at St James and Artisan Real Estate at New Waverley.
Artisan Real Estate’s development will include a 403-bed hotel, 145 residential units, 347,000 sq ft of office space and 82,580 sq ft mixed-use.
“Glasgow city centre is well positioned to benefit from the continued upturn in the strength of the Scottish economy”
James Barr, GVA
Mr Aitken says Scottish-based developers were much less active in the city centre and have tended to fulfil a project management or development manager role for funds from the UK or abroad.
“These funds appear to have replaced traditional development funding from the main UK clearing banks and include Standard Life, Oaktree Capital, Moorfield, M&G and Hermes.”
Glasgow at vanguard of Scottish upturn
“Following the end of the recent period of uncertainty surrounding the referendum decision, Glasgow city centre is well positioned to benefit from the continued upturn in the strength of the Scottish economy,” GVA James Barr planning, development and regeneration associate Alasdair Morrison says.
There are four large-scale office developments on site: 110 Queen Street, One West Regent Street, St Vincent Plaza and Scottish Power’s new headquarters at Charing Cross, totalling nearly 60,000 sq m of new floorspace to be delivered in the next two years.
Student housing remains a buoyant sector for investors both in the city centre and beyond, Mr Morrison adds.
Proposals include Salmon and NFU Mutual’s £12m scheme at Argyle Street/Miller Street, while two projects at North Hanover Street and Dobbies Loan are approaching the detailed planning stage.
Meanwhile the new 10-storey 180-bed student residence at the Riverside Campus of City of Glasgow College is nearing completion.
But there are still plenty of investment opportunities available in Glasgow, including the city’s riverside area.
Sites including Broomielaw, Clyde Street and Clyde Place offer high-density office, hotel or other development proposals and can make use of Glasgow’s “excellent” public transport accessibility, according to Mr Morrison.
Retail is set to grow in the area, with Land Securities now looking to appoint a main contractor, from a shortlist of three, for work on its Buchanan Galleries shopping centre in early 2015.
The extension comprises around 50,000 sq m of retail, plus a multi-screen cinema with restaurants and shops. Work is scheduled to start on site in 2015 with a view to opening in early 2018.
“I think clients are struggling to draw out bid lists and that’s what will bring back two-stage tendering”
Ian Jubb, Galliford Try
Construction Products Association economics director Noble Francis says there are opportunities for contractors in both Glasgow and Edinburgh in the commercial and infrastructure spaces.
He says there were no key new investments in Glasgow’s offices during Q2, with sales volumes below the 10-year average, when uncertainty dominated prior to the referendum.
With this uncertainty now removed, commercial projects such as the £100m Atlantic Square scheme in Glasgow will begin to progress.
Infrastructure now and later
In the long term, infrastructure projects will start to come through the pipeline as a result of the Glasgow and Clyde Valley City Deal – an infrastructure fund of £1.13bn that hopes to attract a further £3.3bn over the next 20 years.
In the near term, Network Rail has announced plans to refurbish Glasgow rail station, worth around £100m, which should start next year.
Scottish Water meanwhile has unveiled a £100m design and build of a three-mile sewer in Glasgow, with construction starting in summer 2015.
Click on map to enlarge
Galliford Try Northern managing director Ian Jubb says his team is busy in the region, with work picking up across all sectors in Scotland.
He says there is “an awful lot being talk about at the moment about what will come through in the next few months” with regards to office development, given a lack of supply in the cities.
But Mr Jubb says there are still affordability issues around the projects, with many firms suffering from inflationary risk.
He adds that two-stage tendering has not yet worked its way up to Scotland in the same way it had south of the border, but that he expects this to become more prevalent.
“I think clients are struggling to draw out bid lists and that’s what will bring back two-stage tendering,” he says.