Aberdeen oil woes take toll on commercial property

Scotland saw a near-£1 billion slide in commercial property investment last year according to new research that provides fresh evidence the Aberdeen slowdown is having a major impact on the wider market.

CBRE said the downturn in the Aberdeen market pulled property returns lower. Picture: Ian Rutherford

Releasing the findings of its latest quarterly property report, consultancy CBRE said the “relative under performance” of the Aberdeen office market had pulled the Scottish all-property total return lower.

Despite that, several sectors managed to outperform an all-property return of 9.2 per cent, with Edinburgh industrials posting a year-on-year gain of 18.3 per cent for the final quarter of 2015, down from 21.5 per cent in Q3. This was followed by Edinburgh offices, with a total return of 14.8 per cent, unchanged from the previous report.

The research notes that investment activity last year “wasn’t quite up to the pace of 2014”. By the end of 2015, a total of £2.17 billion of investment had been made across Scotland – some £900 million less than the previous year.

The only sector which came close to matching the volumes of 2014 was offices, which saw almost £800m being transacted. The largest deal came at the tail end of the year with the sale and leaseback of Standard Life’s headquarters on Lothian Road, Edinburgh.

The key retail deal of the year was the purchase of the Eastgate Centre in Inverness for £116m by Harbert and Scoop Asset Management, with the sector as a whole seeing its transactions totalling £667m in 2015.

CBRE said the most notable change between 2014 and last year was investment into industrial property, with only £143m spent despite the sector’s superior performance for returns, down from £414m the previous year.

Aileen Knox, senior director at CBRE, said: “In the main, the Scotland property quarterly report has shown a fairly varied performance for Scottish real estate across 2015, with capital growth gathering positive results at 3.3 per cent for the year and Glasgow offices showing quarter-on-quarter increase in returns, while the slowdown of the Aberdeen market influenced the final figures.”

Last month, research suggested that investment in Aberdeen’s commercial property market slumped by 80 per cent last year.

The dramatic downturn across the oil industry saw total investment volumes in the Granite City tumble from more than £800m in 2014 to just £162m, commercial property data provider CoStar Group said.