Edinburgh named as investment hot spot for office properties

Published on Tuesday 1 June 2010 21:23

EDINBURGH is one of five UK cities in which the commercial property market is currently rated as a good investment location, according to research published yesterday.

• Edinburgh is forecast to see a strong recovery in office rents. Picture: Ian Georgeson

Estate agency DTZ said it expects the Scottish capital's property market to provide "fair value" as rents are driven up due to a lack of new buildings.

This compares with Glasgow, where rents rises are set to be more subdued.

Alan Macbeth, DTZ's investment director in Scotland, said: "We believe that Edinburgh office market rents will recover fairly strongly in the near term."

He added: "The low level of quality central business district stock overhanging the market, the attraction of Edinburgh as a business location and zero development in the pipeline means that the fall in prime rents should be limited to the 10 per cent that we have already seen and can be expected to rebound for the best buildings."

He said that the "prime" investment market in Scotland had seen a "vigorous recovery" in volumes over the last 12 months, with more than 1 billion of transactions.

But he also said that "secondary" properties, in less desirable locations, were still as much as 60 per cent down in value from their 2007 peak.

DTZ categorises investment potential in locations as either "hot", "warm" or "cold" based on its assessment of their risk-adjusted returns.

The prime London city office market is now considered by DTZ to be the only "hot" investment location in the UK.

Cities rated as "warm", where investors can expect "adequate returns", include Cardiff, Edinburgh, London's West End, Newcastle and Nottingham.

DTZ's annual Money into Property report, presented at a conference in Edinburgh yesterday, predicted that the worst of the global property slump is over and said the value of UK investment-grade commercial property is expected to rise by 8 per cent this year.

However, recovery of commercial property values in Europe and the UK was set to lag behind other markets in the US and Asia. According to DTZ, two thirds of lenders expect to increase lending in 2010 and 2011.