TIAA Henderson (TH Real Estate) will press ahead with tendering £400m of construction contracts on its £850m St James project in Edinburgh following the ‘No’ vote in the Scottish referendum.
Experts have predicted a flurry of major projects will come forward following the referendum as uncertainty had been holding projects back.
The St James scheme incorporates 1m sq ft of retail space, a luxury hotel and up to 250 new homes.
TH Real Estate’s director of development Martin Perry told Construction News it was “easier” to wait until after the vote for decisions on investment and leasing with its St James.
“When the polls started to narrow, a lot of uncertainty crept into [the market],” he said.
“It just got in the way a little bit in the last three or four months because people’s attitude was that they needed a response on, ‘What happens if it’s a Yes vote?’ and a lot of the time it was an awful lot easier to wait until after the vote rather than answer that question.”
TH Real Estate will now aim to tender a series of construction contracts worth collectively 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.
The developer’s £230m scheme to revamp Glasgow’s Buchanan Galleries shopping centre in partnership with Land Securities will now also move ahead, with a main contractor set to be appointed on the project imminently.
Stuart J Agnew, director of national markets and investment at property consultant GVA James Barr, said some overseas high-net-worth investors and UK institutions had been adopting “a wait-and-see attitude” prior to the vote before committing to new deals in Scotland.
He added: “In our opinion, there is now likely to be very active trading in the final quarter of the year in Scotland owing to the weight of the money for investment stock and the need to keep a balanced geographical spread/risk.
“However, it remains to be seen whether pricing in the marketplace will move quickly back in line with the other main regional markets of the UK, or whether there will be a short period of adjustment as more transactions are agreed.”
Development to come
Knight Frank partner and head of global capital markets research Darren Yates expects “a surge” of development in the next 12 to 18 months as the recovery boosts occupier demand, with the recent ‘No’ vote helping this in particular.
He added that investors would also be putting more money into development, since it offered higher returns.
“You’re getting so much yield compression now on standing investments, people will be forced to go up the risk curve,” he said. “So I think a lot of money will be chasing development.”