Property buyers hunt 'bargains' on Princes Street

Published on Saturday 9 May 2009 14:25

EDINBURGH'S Princes Street is witnessing a flurry of commercial property deals as cash-rich buyers go on the hunt for bargains.

The building occupied by Waterstone's and Game, currently owned by the Queen's property venture Crown Estate, is under offer for around 10m to a cash-rich fund understood to be Legal & General Assurance.

The HMV building, owned by Aviva, is due to exchange hands shortly for around 7m to an anonymous cash buyer, while the British Airways Pension Trustees are expecting a rush of bids for the building which currently houses the River Island clothing chain.

Commercial property consultants are heralding the deals as a vote of confidence in the city centre following months of stagnation. Although few are willing to call the bottom of the market, consultants say there has been a marked pick-up in activity in the last few months as cash-rich buyers swoop on sites in desirable, central locations.

Chris Dougray, a director at DTZ in Scotland, said that although yields are a fraction of what they were prior to the market collapse in July 2007, property is still offering favourable returns compared with other investments. With interest rates at a historic low of 0.5 per cent and a continued nervousness around the stock market, he said yields of around 7 per cent on properties in areas such as Princes Street are an attractive prospect.

"Based on all historical analysis, Princes Street looks really cheap at the moment," he said. "There is pent-up demand for that kind of stock now."

Alasdair Humphery, managing director for Jones Lang LaSalle in Scotland, agreed.

"If you have money in the bank, it's doing nothing for you," he said. "Until now it had been a pretty subdued situation for investors and occupiers on Princes Street for quite a while."

Edinburgh's main shopping street received a further boost on Friday when it was announced that Urban Outfitters, the American fashion chain popular with celebrities such as High School Musical star Vanessa Hudgens, is to open its first store in the capital in the building formerly occupied by Zavvi. The shop, which will be spread over three levels, is expected to open by October.

According to a report from the Investment Property Bank (IPD) last week, the decline of UK commercial property values slowed significantly in first three months of the year.

IPD said average returns from commercial property outstripped the equities market in the first quarter but continued to lag behind the bonds market, which provided an average yield of 2.2%.