INVESTMENT in Scotland’s commercial property market surged 82 per cent last year, helping UK deals hit a record high, according to fresh analysis of the sector.
Consultancy JLL said Scotland now represented the second-biggest region for property investment outside London, with investments totalling £3.2 billion in 2014.
Alasdair Humphery, the firm’s lead director for Scotland, said: “The fundamentals of the Scottish economy, including strong GDP growth and low unemployment, all pointed to a compelling economic performance which would have resonated positively with investors looking for performance.”
Last year witnessed what is believed to be Scotland’s largest office deal, when Legal & General Property bought and forward funded the development of the 335,000sq ft headquarters for oil services group Aker Solutions in Aberdeen for more than £127 million.
Other highlights of the year included the sale of The Centre in Livingston, one of Scotland’s largest shopping malls, in December. HSBC Alternative Investments bought the centre, along with the nearby Almondvale West Retail Park, from Land Securities in a deal worth more than £224m.
In the immediate aftermath of September’s referendum, the Hilton Double Tree hotel and Chanter bar in Edinburgh city centre were acquired by Redefine International, which structured the £25.7m deal so it would go ahead only in the event of a No vote.
Humphery added: “We’ve noticed that UK investors are more open to risk and, as a result, increasingly looking beyond London to find better returns in the stronger UK regional cities.
“This has certainly contributed to the perception that Scottish commercial property investment offers a good risk/reward in a continuing uncertain global economy.”
JLL’s figures show that direct property investment in the UK hit a record £65bn last year – 3 per cent higher than the pre-recession peak in 2006 and up 16 per cent on the previous year’s total of £55bn. The UK is the second-largest commercial property market in the world, now accounting for 18 per cent of all global transactions. London recorded £27.5bn of transactions in 2014, of which £17.5bn came from overseas, making it the leading global destination for direct investments. The south-east of England was the top-performing region, with volumes of £5.7bn, followed by Scotland and the West Midlands.
Momentum in Scotland appears to have carried into the current year, with Scottish Widows’ headquarters in Edinburgh changing hands last month in a record deal for the city.
After attracting bids from a range of UK and international investors, the Port Hamilton building in the heart of the financial district was sold by fund manager Aberdeen Asset Management to an unnamed overseas private client of HSBC Private Bank for more than £105m.
Chris Ireland, chairman and head of capital markets for the UK at JLL, said: “2014 activity cemented the UK as one of the best markets for direct real estate investment and one that is being driven by both domestic investors attracted by the relative high returns property offers, and overseas investors drawn to the liquidity and transparency of the UK property market. In light of the low interest rate environment and volatility in other asset classes, we envisage another robust year for UK commercial property.”
• Asset manager River Street Capital yesterday said it has bought a portfolio of prime office properties, including sites in Edinburgh, Glasgow and Stirling, for more than £50m.