Property peak: How Scotland is emerging as the UK’s investment hotspot

Investment into Scotland’s commercial property sector picked up markedly in the first six months of the year bucking the trend in the rest of the UK, where there were sharp falls, new research reveals.

Research by global property consultancy JLL shows that the Scottish property market attracted some £770 million of cash in the first half of 2024, up 30 per cent on the same period a year earlier. Encouragingly, the latest figure is also a 4 per cent increase on the ten-year average trend. It comes after the market took a hit from high interest rates, inflationary pressures and a general lack of investor confidence.

The JLL study shows that London suffered a 46 per cent fall in investment during the first half but still outstripped other regions by attracting £3.5 billion of money. Greater London (£2.8bn), the south east of England (£2bn), the north west of England (£970m) and Scotland at £770m made up the rest of the top five for investment volumes.

JLL said investment in the office sector was beginning to show signs of recovery with a number of key deals taking place in Edinburgh in the first six months of the year.

Overall, investment in the UK’s property sector topped £16.2bn in the first six months of the year, down on the ten-year average of £21.5bn but in line with figures seen in the first half of 2023. Although headline volumes remained a “little subdued” throughout the first half of the year, JLL noted that overall volumes including mergers and acquisitions, land and development investment increased 12 per cent year-on-year to stand at £22.6bn.

Calum Cowe, capital markets director at JLL, said: “While it’s not been the easiest start to the year from either a political or economic perspective, Scotland continues to show its attractiveness to investors. With the recent interest rate cut and growing optimism in the health of the wider economy, we expect to see healthy levels of deal activity in the Scottish market. Investment in the office sector in particular is beginning to show signs of recovery with a number of key deals taking place in both Glasgow and Edinburgh in the first six months of the year.”

He added: “We are also encouraged by the increasing depth of the buyer pool in Scotland. International investors have historically accounted for the lion’s share of volumes over the last few years in the market. However, we have also seen increasing appetite from UK institutions and private investors in the past 12 months. We are therefore optimistic that this improved deal flow will continue for the remainder of the year and into 2025.”

The firm’s data also shows international investors remaining active in the UK, accounting for 52 per cent of the total in the first half and reaffirming confidence in the nation’s property market. The “living” sector, which encompasses all segments of the residential market including student accommodation and retirement homes, maintained demand, attracting the largest proportion of investment. That trend was reflected in Scotland, with investment in the living sector accounting for some 27 per cent of total volumes in the half-year period.

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