Investors snap up £2 billion worth of Scottish property as one key sector doubles

Scottish commercial property investment topped £2 billion last year after a rebound in activity driven by a more stable interest rate environment, new figures have revealed.

Total volumes were up 30 per cent in 2024, compared with the year before, as investment in hotels more than doubled. Total investment hit just over £2.02bn, according to property consultancy Knight Frank’s analysis of Real Capital Analytics (RCA) data. That was significantly higher than 2023’s £1.5bn and slightly ahead of the £1.9bn five-year average figure.

Investment increased across all major commercial property asset types. Hotels had a particularly strong year, more than doubling on 2023 with a rise from £236 million to £488m - marking a five-year high. Edinburgh accounted for more than half of hotel deals, at some £247m, according to the latest data.

The hotel sector had a particularly strong year for investment sales with Edinburgh accounting for more than half of the 2024 volumes.

Offices also saw a significant year-on-year increase in investment volumes, from £368m to £509m, as interest in the sector picked up. Retail was the largest category by total investment at £710m - up 7 per cent on the year before - while industrial property rebounded from a five-year low of £292m in 2023 to £359m last year.

Knight Frank noted that following a relatively quiet first half, international investors returned to the Scottish commercial property market and accounted for 44.3 per cent of overall investment. At the same time, real estate investment trusts (REITs) and listed property companies were said to be much more active during 2024, representing 23.9 per cent of the total - well ahead of their average of 9.5 per cent for the last five years.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of 2024 got off to a slow start, with the general election putting a pause in activity during the second quarter. But, since June there has been a noticeable upturn in deal activity, helped by a clearer idea of what the next five years look like in terms of policy direction and interest rates on a downward trend, combined with political upheaval elsewhere.

“The pool of buyers for Scottish commercial property has also got deeper, and there is good reason to believe that will continue to be the case in 2025 too. International investors were more active in the second half of last year and we expect the new pooled local government pension funds to be actively looking for assets next year to up their weighting to commercial property, in general, but also to Scotland.

“There has been a lot of interest in hotels over the last 12 months, with no signs of that stopping - particularly in Edinburgh. Meanwhile, industrials have picked up after keen pricing tempered appetite for the sector and retail is doing well.”

Steele pointed to “green shoots” or recovery in the office sector. “Volumes were up 38 per cent on 2023 and we would hope to see a rise again in 2025, with more people back in their workplaces and a greater need for diversification among property portfolios,” he added. “But quality will still very much be the name of the game for some time yet.”

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