Scottish commercial property investment falls by third but key retail assets snapped up

Overseas investors were the most active buyer type for a second year running in 2023.

Commercial property investment volumes in Scotland fell by a third last year to just under £1.5 billion amid “ongoing economic uncertainty”, according to new figures.

Despite the decline, property experts said investment volumes remained “relatively robust” in relation to the ten-year average, while certain sectors had seen solid demand during 2023.

The figures from Savills show that commercial investment volumes in Scotland totalled just over £1.49bn in 2023, a 34 per cent decline on the previous year’s haul. While this overall fall can be attributed to ongoing economic uncertainty, the second half of the year saw a marked improvement on the first half and a significant year-on year increase of 39 per cent when compared to the same six-month period in 2022.

The sale of Livingston's The Centre shopping and leisure centre was one of the key investment transactions of 2023.

Despite a UK decline in retail investment, this asset class saw transactions totalling £714 million in Scotland, compared with offices at £357m. This was followed by industrial, leisure and “alternatives” at £172m, £144m and £105m, respectively.

Savills noted that the retail sector’s popularity in Scotland was largely due to the strength of the occupational market. This is especially true in popular destinations such as Buchanan Street in Glasgow and George Street in Edinburgh, it added, which remain attractive given continued rental growth as a result of a lack of supply. As one of the first sectors to suffer during the pandemic, pricing has since “corrected”, the firm said, affording investors a “degree of certainty not yet achieved in other asset classes”.

Key deals across all asset types included the sale by Savills of Craigleith Retail Park in Edinburgh to Realty Income Corporation for more than £60 million and Livingston’s The Centre in West Lothian to LCP and Evolve Estates, part of M Core, for some £45m. Other deals included the acquisition of 191 West George Street, Glasgow by French investor Corum, for £36.4m, and the sale of the landmark Waldorf Astoria hotel in Edinburgh to Henderson Park for over £80m.

In terms of buyer type, overseas investors were the most active for a second year running, accounting for almost 46 per cent of all transactions at £680m. However, this was a marked decline on 2022, which saw £1.025bn of foreign money spent on Scottish commercial property. Property companies (£342m), private investors (£187m) and UK institutions (£127m) also remained active in the market.

Aly Wright, director in the Scottish investment team at Savills, said: “As we know the investment market across the UK has been impacted by ongoing uncertainty, with pricing yet to find its footing. However, Scottish investment figures have remained relatively robust at 27 per cent below the ten-year average. What is also interesting to note is the type of asset investors are buying, with retail investment in Scotland seeing the highest level of transactions since 2016.

“Although we continue to see uncertainty in the office sector, given the drive to repurpose obsolete stock, the investment rationale for up and built, well located product will become increasingly compelling moving forward, compounded by an extremely limited development pipeline across Scotland’s main centres. All things considered, 2023 was a relatively positive year, and while we anticipate a slow first quarter of 2024, we are positive this will pick-up post-Easter as markets continue to stabilise.”