Middle East conflict heightening risk of empty shops and offices amid 'incredibly tough' situation
A study has found the Middle East conflict is adding to business property confidence.
Empty shops and officers are poised to tally up across Scotland as businesses face “incredibly tough” prospects heightened by the war in the Middle East.
New research has found that mounting uncertainty of a global energy shock due to the Middle East conflict, alongside rising employment costs and a challenging tax environment is denting business confidence in Scotland.
Business leaders have warned that firms are “delaying, scaling back and cancelling vital investments” due to the gloomy economic picture - with the retail sector, in particular, facing a confidence crisis.
Research from the Royal Institution of Chartered Surveyors (RICS) has found that in the first quarter of 2026, overall occupier demand in Scotland was flat - marking the first time since 2022 that this net balance hasn’t been in positive territory.
RICS’ quarterly commercial property monitor study for Scotland also found that enquiries from investors were lower - with the cautious environment blamed, at least in part, to the escalation of geopolitical tensions in the Middle East.
READ MORE: How the Middle East conflict is impacting Scotland’s property market, and what is still hot
The study found that there was a significant divergence between the industrial sector and retail, with occupier demand for industrial space continuing to increase according to the balance of respondents, office demand broadly flat, and retail demand appearing to have fallen.
Looking ahead, respondents to the RICS’ survey in Scotland expect commercial property capital values to edge lower over the next quarter due to the impact of the conflict, with the net balances for both office and retail now in negative territory and the net balance for industrial space having eased back.
Michelle Ferguson, CBI Scotland director, said: “Our members have been feeling acute pressures over the past year.
“Firms are navigating rising employment costs, a challenging tax environment and the mounting uncertainty of a global energy shock following war in the Middle East. Taken in isolation, each of those pressures is significant, but having to navigate all three at once is incredibly tough for any business.”
She added: “Against this challenging backdrop of escalating costs and rising uncertainty, we know that firms are delaying, scaling back and cancelling vital investments – including in their people, their premises and their operations.
“To rebuild business confidence and unlock investment we need business and government to work together to find appropriate landing zones on the Employment Rights Act, deliver meaningful reform to an unfit business rates system, and further explore how we help lower business energy bills.”
Charandeep Singh, chief executive of the Scottish Chambers of Commerce, said: “The RICS findings reinforce the fragile economic picture facing Scottish businesses. As geopolitical uncertainty weighs on confidence, we are seeing more cautious investment decisions at the very moment firms are grappling with persistently high costs at home.
“Commercial property demand does not exist in isolation. Our research shows soaring business rates are among the top concerns for firms ahead of the election. For many firms, rising rates combined with global uncertainty are creating a real brake on expansion and investment.
“Addressing business rates and creating the right conditions for investment is critical to rebuilding confidence, otherwise caution and cost pressures will continue to hold the commercial property market back.”
RICS head of market research and 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.”
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