Property consultancy CBRE published data yesterday showing that the annual total return for 2017 in Scotland was 6.8 per cent, while the UK as a whole notched up a total return of 10.2 per cent, as measured by the IPD Quarterly Index.
Over the fourth quarter, the all-property total return was 2.1 per cent, up from 1.7 per cent in the previous three-month period.
The increase was attributed to improved capital growth, with average capital values up by 0.6 per cent. This represented the bulk of capital appreciation during the year.
Industrials were singled out as the key differentiating factor in the UK’s relative outperformance against Scotland, with the pace of rental growth in the London and south-east of England industrial markets leading the charge. However, for some other sectors, the performance gap between the UK and Scotland has narrowed, notably high-street shops and offices.
Office sector total returns for the final quarter rose to 2.2 per cent, from 1.6 per cent in Q3, representing the largest quarterly uplift in returns for any of the three principal property sectors in Scotland. It was also the highest total return for the Scottish office sector since the final quarter of 2015.
At a city level, the industrial markets in Glasgow (14.2 per cent) and Edinburgh (11.6 per cent) were the only two city/sector groupings to achieve double-digit returns in 2017. The market in Aberdeen continues to lag significantly behind the Central Belt cities, but at 2.8 per cent the industrial sector is now generating positive returns.
A total of £2.5 billion of commercial property stock was transacted in Scotland during 2017, up from £2.12bn in 2016. While investment volumes were relatively low in the first half of the year, the second half, and in particular the final quarter, had a significant impact on the strength of the year-end total, CBRE noted.
Steven Newlands, an executive director at CBRE, said: “These results are encouraging for the investment market in Scotland, where sentiment improved following the general election result last year, which reduced, in investors’ eyes, the likelihood of a second independence referendum. It should be noted that Scottish property continues to offer good value to investors.”