Major UK institutions such as pension funds are expected to jump back into Scotland’s property investment market in the event that the UK votes to remain in the EU, industry experts have predicted.
Recent research has pointed to a slowdown in commercial property investment north of the Border amid political uncertainty and the knock-on effect of the lower oil price and reduced North Sea activity.
In its latest property review, consultancy Ryden notes that the “hangover” from September 2014’s independence referendum continues to linger as fund managers “carefully consider their weightings to Scotland and also apply a perceived risk premium to new propositions”.
That reticence has been compounded by the forthcoming Brexit vote, though the review also highlights more buoyant activity among smaller UK institutions and individuals, overseas investors and private equity.
Ryden partner and author of the report, Mark Robertson, said: “The current situation with the Holyrood elections next week and the EU vote in June is another reason for investors to pause for thought.
“We may be dealing with a medium-term situation where UK institutions that have full asset allocations to Scotland will be very quiet. The market will be driven by other investor types.”
But he said both Edinburgh and Glasgow could benefit from an uptick in demand and activity in the event of an “in” vote on 23 June.
Ryden’s biannual review examines every major office, retail and industrial letting and investment deal over the past six months.
It notes that the capital growth cycle has moved towards a peak so investors are having to look “further up the risk curve” at the likes of new developments and the asset management of existing properties.
“As we reach a slower point in the growth of capital value then those investors that want to achieve higher returns will have to take more risk,” observed Robertson.
“Development opportunities are few and far between but the market is very good for those developers who can access sites and funding.”