Martin Flanagan: Edinburgh rides out Brexit apprehension

If there is distinct political and commercial uncertainty in the UK air in the slipstream of the Brexit vote then somebody has been remiss in failing to tell the Edinburgh property market, which seems firmly on the front foot.

Hotels and offices in Edinburgh are in demand despite the uncertainties stemming from the EU vote. Picture: Steven Scott Taylor

A report from property experts JLL revealed that overseas investors have been flocking to the office market in the Scottish capital. JLL said that in 2016 the proportion of investment in the city’s offices from foreign buyers jumped to 93 per cent from 62 per cent in 2015. That’s hardly a mark of apprehension.

Meanwhile, a separate report out from real estate adviser Savills yesterday says that investment in the city’s office market last year touched heights not seen since 2006, two years before the financial crisis. Transaction values reached £426 million, 73 per cent above the ten-year annual average of £246m.

This fits in with the unfolding view in the property sector that big cities outside London are likely to be more upholstered against headwinds of Brexit than London.

Ironically, it is possible foreign appetite for Edinburgh office space was aided by the sharp devaluation of sterling since the Brexit vote. So a knock-on ramification of a seismic development that conventional wisdom might have thought would squeeze the commercial property market actually ends up helping to power it.

And it is not just offices. One of Edinburgh’s landmark city centre hotels, the Holiday Inn Express in Picardy Place, was yesterday snapped up for a little short of £18m.

The purchase price is tidy rather than astronomical, largely due to the hotel’s owner, European Development Company (EDC), going into administration late last year amid severe cash flow problems. Administrators, in this case FRP Advisory, seldom get top dollar for subsidiaries they try to sell from under a parent company’s collapse.

But the comment of the Holiday Inn’s buyer, International Hotel Properties, that the Scottish capital has “the most stable hotel market in the UK, outside London” is further testament to the strength of Edinburgh’s wider real estate sector.

And if there are some further corporate casualities if UK growth falls as expected, that may also underpin the market.

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