Overseas investors target Scotland as property volumes rebound over summer

Property experts are banking on a strong end to the year after investment volumes in Scotland rebounded over the summer following a “Covid quarter” wipeout.

There was a renewed interest in Scotland from Asia Pacific-based investors, who accounted for over half of all investment volumes. This included the largest deal of the quarter which saw South Korean Hyundai Asset Management purchase 1-3 Lochside Crescent in Edinburgh for just over £133m. The building is currently let to insurer Aegon. Picture: Greg Macvean

Investment volumes in the third quarter of 2020, covering July, August and September, reached £477 million, according to property consultant Colliers International’s latest snapshot.

That marked the highest quarterly figure in a year, though it was still almost 20 per cent below the five-year quarterly average of £564m. It comes after investment volumes slowed to a near standstill in the second quarter of this year, when the figure plummeted to just £35m.

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The firm said there was hope for a strong end to the year with pent-up demand driving activity.

Oliver Kolodseike, associate director, research and forecasting, at Colliers International, said: “It is positive to see that transactional volumes have started to pick up again and we are now expecting a strong end to the year in Scotland as we recover from the ‘Covid quarter’.

“An annual investment total of £1.5 billion across all sectors would be a positive result given the nationwide lockdown earlier in the year.”

The firm’s analysis found that the office and alternative sectors accounted for three quarters of all activity by value, while investment volumes in the industrial sector were 40 per cent above its five-year quarterly average. Given the ongoing impact of the pandemic, activity in the retail segment was limited, Colliers noted.

There was a renewed interest in Scotland from Asia Pacific-based investors, who accounted for over half of all investment volumes. This included the quarter’s largest deal which saw South Korean Hyundai Asset Management purchase 1-3 Lochside Crescent in Edinburgh for just over £133m. The 247,500 sq ft asset is currently let to insurer Aegon.

The deal marked Hyundai Asset Management’s second Edinburgh purchase in less than 18 months, having already bought Gyle Square in April 2019 for £55m in one of Scotland’s other largest office deals that year.

Looking in more detail at investment in the office sector, a total of £186m was invested during the third quarter, only slightly weaker than the £196m transacted a year ago and marginally below the five-year quarterly average of £193m.

In one of Scotland’s other largest office deals this year, Singaporean Elite Partners Capital bought 150 Broomielaw, the 97,000 sq ft building completely let to Scottish Enterprise, for £40m.

Industrial investment activity picked up during the past quarter, with volumes reaching £80m, 40 per cent above the five-year quarterly average of £56m.

The figure was boosted significantly by the sale of Amazon’s one million sq ft logistics centre to Korean-based KB Securities for £66.8m, representing the second-largest industrial deal ever recorded in Scotland.

Patrick Ford, director, national capital markets, Colliers International in Glasgow, said: “It was good to see this relatively strong investment performance in the industrial sector in Scotland’s two biggest cities in Q3.

“Overseas investors, particularly those located in Asia, remain very interested in the Scottish industrial sector and large deals continue to be done, despite global economic uncertainty on the back of Covid.”

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