Overseas investors pile into Scotland's property market as volumes jump in Q1

Scotland’s commercial property market is attracting a significant amount of overseas investment after a jump in quarterly volumes, a new report reveals.

Investment volumes reached £460 million in the first quarter of 2022, up from £380m a year earlier, according to Colliers’ latest Scottish snapshot. At £140m, retail investment accounted for 30 per cent of all activity by value.

Despite investment volumes being 20 per cent below the five-year average of £570m, the country attracted a sizeble amount of overseas investment with cross-border capital accounting for more than 60 per cent of all activity - one of the largest shares on record, the report notes.

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It comes after a study in January showed that investment in Scottish commercial property had held up in the face of volatile market conditions with a “wall of overseas capital” chasing prime assets.

Releasing its latest review, property advisor Lismore Real Estate Advisors said the investment market had “fared surprisingly well” with investment volumes trading at just under £1.35 billion in 2021, a 24 per cent increase on the total for 2020.

The Colliers snapshot found that Aberdeen attracted £160m of investment in the first quarter of this year, considerably higher than the average of £40m, while £150m was transacted in Edinburgh. Activity was limited in Glasgow.

The largest deal of the quarter was Kennedy Wilson’s £78m purchase of Edinburgh’s Waverley Gate offices

Oliver Kolodseike, director in the research and economics team at Colliers, said: “Comparing the first quarter of the year to the same period in 2021 gives us a clear indication of how well the market has recovered.

An aerial view of Edinburgh, which was among the locations featured in the latest Colliers Scottish snapshot.

“One of the most interesting trends is the resurgence of overseas investors who have been particularly active in the retail sector over the past 12 months, investing almost £400m in total.”

After annual investment sales volumes in the office sector improved slightly from 2020’s nine-year low of £380m to £490m in 2021, activity was subdued in Q1 2022, with only one significant transaction recorded - the Waverley Gate deal. LXI REIT signed a forward-funding deal for BT’s new offices in Dundee as part of a £57m portfolio, which also included car storage.

In the office occupier market, city centre take-up in Glasgow reached just over 90,000 square feet in Q1, up by 47 per cent on the corresponding 2021 figure.

Demand for space in Edinburgh remains strong, Colliers noted, with 180,000 sq ft leased in Q1 2022, twice the corresponding year-earlier figure.

Around £90m was transacted in the industrial sector across nine deals in the first quarter of this year. That was almost 30 per cent above the five-year quarterly average and an improvement on the £56m transacted in Q1 2021.

Notable deals included ICG Real Estate’s purchase of the 215,700 sq ft Royal Mail sorting warehouse in Edinburgh for £34m and the sale of the Orbitstates Building in Aberdeen for £15m.

The Q1 2022 take-up of industrial space reached 1.2 million sq ft, down by 13 per cent on the corresponding 2021 period, with occupiers struggling to satisfy their space requirements amid a lack of supply.

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'Wall of overseas capital' chasing Scottish property assets as volumes rise 24% ...
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