Scotland’s commercial property market continued its slow recovery in the opening months of the year as the wider economy gathered pace, new research reveals.
The office, retail and industrial sectors all posted positive investment returns as headline-grabbing deals were agreed across the market, according to property experts.
Releasing its latest Scottish quarterly “marketview”, property consultancy CBRE said Scotland’s total return for the first quarter was 0.2 per cent, compared with a fall of 0.3 per cent in the final three months of 2012.
However, the Q1 gain trailed the 1.1 per cent growth seen across the UK, which has been underpinned by the strength of the property market in central London.
Aileen Knox, senior director, CBRE Scotland, said: “Our research shows signs of modest growth across Scotland’s commercial property market, indicating that the Scottish economy is continuing its slow recovery from the recession.
“The overall UK performance is driven by the strength of the central London property market; in fact if London and the south east are stripped out of the UK figures, Scotland is one of the UK’s strongest regions.”
The report notes that £123 million changed hands in the Scottish property investment market in the quarter, with more than half of that total being accounted for by the office sector. At £46m, Edinburgh’s Waverleygate was the largest office deal concluded, at a yield of 7.3 per cent. Occupiers of the former general post office building include online giant Amazon and the Scottish government. Retail transactions amounted to £24m and industrials some £18m.
Knox added: “Compared with the previous quarter, when Scottish investment transactions reached £409m, investment activity is down. However quarterly investment volumes do vary, especially in the final quarter of the year when investors are under pressure to spend their allocations.”
Total returns for the office sector scraped into positive territory, at 0.02 per cent, after a fall of 0.4 per cent in the preceding three months. Meanwhile, the decline in rental values slowed to -0.3 per cent from -0.7 per cent.
Even though returns were only just positive, the sector was found to have performed better than anywhere else in the UK outside of London.
Elsewhere, total returns in the retail sector improved to a positive 0.1 per cent in Q1, from -0.3 per cent in the fourth quarter of 2012. This was mainly due to a slower pace of decline in capital values, the report noted.
Industrials was the strongest performing property sector, achieving a total return of 0.9 per cent in the latest three-month period. On an annual basis, Scottish industrial properties, such as factories and warehousing, outperformed the UK by a slight margin.
The report is the latest piece of evidence pointing to a steady if unspectacular revival in activity after Scotland’s commercial property sector was battered in the wake of the credit crunch.