Investment volumes north of the Border totalled £1.3 billion last year, down from £2.1bn in 2019 and the weakest annual figure since 2012, according to new analysis from property consultancy Colliers International.
However, the firm’s Scotland snapshot, covering the final quarter of last year and giving an early outlook for 2021, pointed to a picture that was becoming “more positive”.
Elliot Cassels, director, national capital markets, Colliers International in Edinburgh, said: “There is genuine optimism in the Scottish investment market, in anticipation of restrictions being lifted.
“A Brexit trade deal that looked very unlikely has been struck, which will calm nervous investors. And with mass vaccinations being rolled out across the UK there is finally light at the end of the Covid tunnel.”
Despite the overall drop in investment last year, the “alternative” sector had a record year with volumes reaching £458 million, more than double the five-year annual average of £221m.
Colliers said this was largely the result of strong demand for residential assets. Its analysis found that investor appetite was also strong for distribution warehouses and business parks, both of which exceeded their respective five-year averages.
Cross-border capital accounted for 54 per cent of all activity by value, while the share of institutional investors fell to a record low of 8 per cent, against the five-year average of 19 per cent.
The two largest deals by value in 2020 were office assets in Edinburgh, with Springside being sold for £215m and 1-3 Lochside Crescent being traded for some £133.3m. The Scottish capital attracted a total of £606m last year, down from £867m in 2019, while Glasgow accounted for £204m, down from £679m.
Office take-up in Edinburgh reached some 534,000 square feet last year, down by about 16 per cent on the previous year’s total and below the ten-year annual average of 807,000 sq ft. A highlight was Ballie Gifford’s move to pre-let 280,000 sq ft at The Haymarket in the city’s west end.
Oliver Kolodseike, deputy UK chief economist, research and forecasting, at Colliers, said: “While demand for office space may be hampered during the first half of this year due to lockdown restrictions and high infection rates, we see a strong rebound on the cards for the second six months.”
Despite the uncertain economic backdrop, headline rents in Edinburgh city centre have risen from £35.50 to £37.50 per sq ft.
High street retail was hard hit last year and this trend has continued with the recent news on Jenners in Edinburgh and Debenhams across the UK. Colliers said investor interest for retail was “muted” in 2020, with annual volumes falling to £208m from £300m the previous year.
The findings largely mirror recent analysis of the investment market from Knight Frank, the commercial property consultancy.
It found that despite the slump lat year, Scotland proved its resilience as the most popular UK destination for overseas investment outside London and the south east of the England.