Edinburgh and Glasgow challenges revealed as property investment rebounds

Scotland’s property investment market made a strong start to 2022 as investor appetite for prime assets returned, a new report suggests.

Quarterly transactional volumes in the first quarter were up 260 per cent compared with the opening three months of 2021, a period that was significantly impacted by the pandemic, according to the latest quarterly review by Lismore Real Estate Advisors.

At around £630 million, volumes are 35 per cent over the five-year average, the first time this has happened in three years, the report notes.

The top three deals for the first quarter of this year were the £140m sale of the Silverburn shopping centre in Glasgow, the £111m sale of Westway Park in Renfrew by Canmoor to Ares Management and Patrizia’s £78m-plus sale of Waverleygate in Edinburgh to Kennedy Wilson.

The top deals for the first quarter included the £140 million sale of the Silverburn shopping centre in Glasgow.

Chris Macfarlane, director of Lismore, said: “Prime distribution pricing is hardening, with investors continuing to chase opportunities, which is likely to sustain pricing during 2022. Opportunistic buyers are seeing value in prime shopping centres and investor appetite remains for the best re-priced quality assets.

“Retail warehousing remains in demand, but stock is limited and competition for the best assets is fierce. High street retail shows signs of recovery, albeit with pricing discounted, offering opportunity for those willing to dip their toes in the water.

“However, economic pressures, including cost of living and rising energy prices are expected to push inflation to a 40-year high of 8.7 per cent by Q4, so there is the potential for a knock on effect filtering through to retail spend.”

Lismore said the distribution/logistics sector continues to attract a “significant weight of capital” with prime Scottish assets “still looking like reasonable value compared to south of the Border”.

The US remains the most active source of overseas capital, particularly targeting retail warehousing and core plus offices. South Korean investors remain the most active vendors for larger assets, primarily on the back of some institutions unable to secure sufficient syndication in their domestic markets, the latest review notes.

Meanwhile, investor research conducted by Lismore highlights the opportunities and challenges for the Edinburgh and Glasgow commercial property markets.

Some 81 per cent of respondents identified workers returning to the office as the key factor in vitality returning to Scotland’s two major cities, along with the return of trade to city centre restaurants, bars and coffee shops.

When questioned about favoured sectors, the investor research confirmed the traditional view that Edinburgh is strong in the office sector and industrial is king in Glasgow.

About 43 per cent of respondents listed industrial as their top sector in Glasgow, compared to 33 per cent in Edinburgh, although this result was closer than expected, Lismore said. The Edinburgh office market is the sector of choice for 33 per cent of respondents with only 7 per cent selecting offices as their first choice in Glasgow.

Graeme Bone, group managing director of Drum Property Group, said: “We remain positive about offices in Glasgow. However, arguably everyone in the country is in the wrong size of office right now.”

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