Scottish property market on track to smash £2bn figure

● Figures show Glasgow office market overtakes capital for deals so far in 2018

Strong demand from both the UK and overseas is expected to see investment in Scotland’s commercial property sector this year outstrip the £2 billion seen in 2017.

Figures compiled by property advisor Savills found that £1.74bn worth of deals have already been completed so far in 2018 with a further £265 million currently under offer, putting Scotland on track for one of the strongest years on record. At this point last year smoe £910m of deals had been completed, although a very strong last quarter more than doubled the year’s tally.

Demand in the office sector has been responsible for the largest proportion of deals in 2018.

After several years where Edinburgh has seen the bulk of office investment, Glasgow has seen the lion’s share of volumes with £382m invested across 16 deals.

Nick Penny, head of Savills Scotland and director in the investment team, said the figures show that investors are continuing to be attracted to the market north of the border which is seen as good value relative to the wider UK sector.

“While investor demand continues to push down office yields in Edinburgh, there’s growing interest in Glasgow which, with large developments underway, is on the cusp of significant change and investors are buying into this,” he said.

“Meanwhile deals are happening in Aberdeen with buyers attracted to the considerable discount on offer.”

Although the office sector is the largest in terms of investment so far this year, Savills said there was also strong appetite for retail warehousing and industrial property. Some £400m has been invested in Scotland’s retail warehousing sector in 2018, up from £60m last year.

Key deals include investments at Fort Kinnaird in Edinburgh, Almondvale South in Livingston and Caledonian Retail Park in Wishaw.

However, there have been only four high street retail deals across Scotland so far totalling less than £57m, of which three have been on Buchanan Street in Glasgow.

Over £230m of deals have been completed across 25 transactions in the industrial sector although Savills says volumes are being hampered by a lack of stock on the market.

Growing appetite for alternative assets such as hotels has seen £300m traded. The figures included the £85m sale of the Caledonian Waldorf Astoria Hotel in Edinburgh. UK and Middle Eastern investors have been particularly active in the sector in Scotland.

The latest Savills report comes on the back of figures from rival CBRE which showed returns on investment in the commercial property sector in Scotland are now close to matching those being achieved across the UK as a whole, with the exception of the industrial sector. Figures from JLL also showed that investment in the Scottish commercial property market hit a record high in the second quarter of this year.