Mixed year for commercial property
Commercial property investment volumes in Scotland fell by a third last year to just under £1.5 billion amid “ongoing economic uncertainty”, according to new figures.
Despite the decline, property experts said investment volumes remained “relatively robust” in relation to the tenyear average, while certain sectors had seen solid demand during 2023.
The figures from Savills show that commercial investment volumes in Scotland totalled just over £1.49bn in 2023 – a 34 per cent decline on the previous year’s total.
While this overall fall can be attributed to ongoing economic uncertainty, the second half of the year saw a marked improvement on the first half, and a significant year-on year increase of 39 per cent when compared to the same sixmonth period in 2022.
Despite a UK decline in retail investment, this asset class saw transactions totalling £714 million in Scotland, compared with offices at £357m. This was followed by industrial (£172m), leisure (£144m) and “alternatives” (£105m).
Savills noted that the retail sector’s popularity in Scotland was largely due to the strength of the occupational market, especially in popular destinations such as Buchanan Street in Glasgow and George Street in Edinburgh.
As one of the first sectors to suffer during the pandemic, pricing has since “corrected”, the firm said, affording investors a “degree of certainty”.
Key deals across all asset types included the sale by Savills of Craigleith Retail Park in Edinburgh to Realty Income Corporation for more than £60m and Livingston’s The Centre in West Lothian to LCP and Evolve Estates, part of M Core, for £45m.
Other deals included the acquisition of 191 West George Street, Glasgow by French investor Corum for £36.4m, and the sale of the landmark Waldorf Astoria hotel in Edinburgh to Henderson Park for over £80m.
In terms of buyer type, overseas investors were the most active for a second year running, accounting for almost 46 per cent of all transactions at £680m. However, this was a marked decline on 2022’s £1.025bn. Property companies (£342m), private investors (£187m) and UK institutions (£127m) also remained active in the market.
Aly Wright, director in the Scottish investment team at Savills, said: “Scottish investment figures have remained relatively robust at 27 per cent below the ten-year average. What is also interesting to note is the type of asset investors are buying, with retail investment in Scotland seeing the highest level of transactions since 2016.
“Although we continue to see uncertainty in the office sector, given the drive to repurpose obsolete stock, the investment rationale for up and built, welllocated product will become increasingly compelling, compounded by an extremely limited development pipeline.”