Scots fund stalled projects

The Scottish Government is planning to help boost commercial property development by funding stalled and collapsed real estate projects…

The new comes when a new report shows that the volume of commercial property development in Scotland has slowed significantly due to the recession and a huge shortage of grade A office space is likely once the economy picks up.

The report from commerical property experts Rydenin shows that the collapse of the financial services industry in Edinburgh has hit the confidence of investors and developers. There are now no new planned office schemes due to be completed in the capital city between 2010 and 2012 and there is uncertainty about other projects.

In Glasgow there is no grade A office space due for completion in 2010 and 2011 and the slowdown has hit all three commerical sectors – industrial, retail and office. The only positive note is that it is now likely that prices have reached rock bottom.

Now the Scottish Government has applied under new European Union guidelines to assist commercial property development where there is market failure. The Government's state aid unit has applied for permission to fund stalled or collapsed property schemes under the regulations.

The funding will not come from the EU but directly from the local authorities and development agencies in Scotland. However, part of the funding process involves notifying the EU of the plans under the EU's general block exemption regulations, which cover aid for businesses.

The aid can take the form of development grants, subsidised loans and rebates, development financing aid, or development services. The developer still has to meet at least 25 per cent of the costs.

The new funding programme will work alongside other schemes designed as a public sector shot in the arm for commercial property, such as the Joint European Support for Sustainable Investment in City Areas.