Pandemic dents commercial property investment in Scotland but 'reasons for optimism' emerging

Commercial property investment volumes in Scotland remain well below the five-year quarterly average but there are “reasons for optimism”, according to fresh analysis.

Property consultancy Colliers’ snapshot for the second quarter of 2021 reveals that more than £400 million was invested during the period, up from the £371m transacted in the first three months of the year.

But investment was about 20 per cent below the five-year quarterly average of £528m, as the effects of the pandemic continue to be felt.

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The firm pointed to signs of recovery, with transactional activity much stronger than a year ago. And at the half year mark, investment volumes were up by more than 50 per cent on the same time in 2020.

The four largest office deals in the second quarter were all recorded in Edinburgh, led by Rockstar Games buying its own building on Holyrood Road and the adjoining Holyrood Park House (pictured).

Oliver Kolodseike, deputy UK chief economist, research and forecasting, at Colliers, said: “While investment in the second three months of this year was still well below the five-year quarterly average, there are reasons for optimism.

“There is pent-up capital waiting to be deployed in Scotland A number of deals are currently under offer and should complete in the coming weeks and months.

“We expect a further boost with remaining restrictions due to be eased in Scotland on August 9 and we should return to some form of normality.”

The alternative, or mixed-use, sector accounted for about 40 per cent of all activity by value in the first six months of the year. In the largest deal in this sector, LCN Capital bought the Alba complex life sciences campus in Livingston for £45m.

Offices made up almost half of all investment in the second quarter as transactional activity picked up, with more than £180m invested. This was three times the first-quarter figure of £60m and above the five-year quarterly average of £165m.

The four largest office deals in the second quarter were all recorded in Edinburgh, Colliers noted, led by Rockstar Games buying its own building on Holyrood Road – the former home to The Scotsman – for £31m and the adjoining Holyrood Park House for £17m.

In the industrial sector, investment reached some £70m in the second quarter, up from £52m in the opening three months of the year, and around 10 per cent above the five-year quarterly average of £62m. The largest deal was DataVita’s acquisition of the Fortis data centre at Strathclyde Business Park for £45m.

Turning to the retail sector, which has been hard hit by the fallout from Covid, around £60m was invested in the second quarter.

Although this was double the first-quarter figure, it is less than half the five-year average of £130m. The largest retail deal was the sale of a B&Q warehouse in East Kilbride to an American real estate investment trust for £19m.

Within offices, Colliers expects a strong rebound in the second half of the year as lockdown restrictions ease further. In one of the largest leasing deals of the second quarter, BT signed a pre-let for 80,000 square feet of office space at Dundee’s West Marketgait scheme.

Elliot Cassels, director, national capital markets in Edinburgh, added: “There has been strong investor demand for Edinburgh offices, with keen prices having been paid. Footfall in city centres still remains low and investor appetite thin for high street retail and leisure.”

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