Scotland’s commercial property market is holding up better than the rest of the UK despite being buffeted by Brexit uncertainty, new research suggests.
Total investment volume for the first nine months of 2019 was down by 12 per cent year-on-year in Scotland, according to new figures from Colliers International, the property adviser. That compares with a fall of 26 per cent for the whole of the UK.
Property experts from the firm said the cooling economy and uncertainty over Brexit and the global outlook had caused investors to adopt a more cautious approach.
Douglas McPhail, head of Colliers International in Scotland, said that investment in Scottish property totalled some £717 million in the third quarter, marking an 18-month high and compared with £347m in Q1 and £619m in Q2.
He noted: “Although investment volumes during the first nine months of the year are down by 12 per cent compared to the same period in 2018, it is very likely that activity will break through the £2 billion mark for the sixth year running.”
McPhail added that the proportion of international money flowing into Scottish property saw an upturn in the third quarter, with particularly strong interest from Middle Eastern (£182m) and US (£160m) investors.
Scotland’s relative outperformance comes despite a greater reliance on overseas investors, who account for around 55 per cent of Scottish investment and 43 per cent of UK investment.
Patrick Ford, director of Capital Markets at Colliers International in Glasgow, said: “By city, Glasgow was the star performer, attracting £278m of capital, closely followed by Edinburgh at £226m.
“The largest deal of the quarter was Hines Global Income Trust’s purchase of the ‘true Glasgow West End’, a 607-bed operational student asset, traded for £72m. This was followed by Ashby Capital’s acquisition of Abbotsinch Retail Park in Paisley for £67m. Completing the top three deals is Arbah Capital’s purchase of Glasgow’s Sauchiehall Building – a leisure and retail mixed-use asset – for £55m.”
These deals mean that Glasgow’s strong office market is expected to bypass the five-year average of 700,000 square feet by the end of 2019.
Ford added: “Demand for space remains healthy and a lack of stock will continue to exert upward pressure on rents. In Edinburgh, the office market is characterised by lack of existing stock. A number of significant requirements cannot be met by existing supply and are likely to result in pre-lets.”
In Aberdeen, Q3 saw the largest office deal in three years with the letting of 51,356 sq ft at Aberdeen International Business Park to Oceaneering.