Scotland’s property investment market pauses for breath after deal activity tumbles over summer

Scotland’s property investment market is likely to see continued volatility after a slump in deal activity over the summer, a new study has warned.

After a strong post-Covid bounce back, industry observers are predicting a challenging winter, with caution being the watchword in the short to medium term.

Releasing its latest quarterly review, Lismore Real Estate Advisors said the momentum from the first half of the year had not carried through, with the third quarter seeing some £339 million of transactions traded, compared with £612m in the previous quarter.

Hide Ad
Hide Ad

Activity for the quarter was some 26 per cent below the five-year average, however the year-to-date position of around £1.45 billion is still well ahead of the same period in 2021 (£1.1bn).

Key transactions in the latest quarter included the £20m (7.7 per cent yield) sale of Equinor House at Prime Four by Golden Globe Merchants to GG Capital in an improving Aberdeen market.

Other deals highlighted in the report included the £15.35m sale (6.5 per cent yield) of a prime multi-let retail and office block on Edinburgh’s George Street by BBC Pension Trust to Broadland Properties.

In the west, Redevco completed the £9.25m acquisition (8.72 per cent yield) of 11 Minerva Way in Finnieston from a client of CBRE Investment Management. At Eurocentral, prime logistics pricing softened with Threadneedle’s £11.1m sale (5.25 per cent yield) of 5 Brittain Way at Eurocentral to Custodian REIT.

Lismore director Richard Mackie said: “Signs of a general market slowdown were starting to show pre-summer. Well documented macroeconomic challenges meant investors became cautious and volumes slowed over the summer months.

Key transactions in the latest quarter included the sale of Equinor House at Prime Four by Golden Globe Merchants to GG Capital in an improving Aberdeen market.Key transactions in the latest quarter included the sale of Equinor House at Prime Four by Golden Globe Merchants to GG Capital in an improving Aberdeen market.
Key transactions in the latest quarter included the sale of Equinor House at Prime Four by Golden Globe Merchants to GG Capital in an improving Aberdeen market.

“Fast forward a month and add in the ‘Mini Budget’, subsequent financial markets turmoil and sterling collapse, it is not surprising that we have seen investor confidence wane, deals stall and values coming under pressure.”

Recent investor research by Lismore indicated that 96 per cent of respondents expect to be on the acquisition trail over the next 12 months, albeit with vendor and purchaser pricing aspirations expected to be out of sync. On a positive note, 100 per cent of property companies and funds questioned viewed the next 12 months as a buying opportunity.

Mackie added: “Looking to the future, there is always a market; it is just a matter of pricing. The challenge will be how quickly can investor confidence return and at what point the current gap can be bridged to create a fluid market.

Hide Ad
Hide Ad

“The pricing adjustments will see the canniest investors, who are well-financed and can act with speed become more active in a less crowded market.

“History tells us that markets can bounce back quickly when stability returns - 2023 is likely to be more interesting with a small ray of light in a fairly long tunnel.”

When questioned about average cross sector reduction in values, 42 per cent of respondents believe values will reduce by up to 10 per cent with 44 per cent anticipating a reduction of up to 15 per cent. Only 15 per cent expect values to reduce by 20 per cent or more.

Related topics:

Comments

 0 comments

Want to join the conversation? Please or to comment on this article.