Edinburgh, the capital of Scotland, is currently experiencing a remarkable boom in its commercial property market. This surge is evident despite the challenging economic environment that prevails globally.
According to the latest analysis by Knight Frank, a leading independent commercial property consultancy, Edinburgh’s commercial property market has already surpassed the total investment figures of the previous year. An impressive £596 million worth of commercial property has been transacted in the year to date, exceeding the £555 million recorded for the entirety of 2022.
Retail Property Investments on the Rise
A significant highlight is the nearly 70% increase in investment in retail properties, reaching £170 million up from £102 million last year. This is the highest in six years. Notable transactions include the sales of Craigleith Retail Park and Corstorphine Retail Park. This spike indicates a renewed confidence in the retail sector, likely fueled by shifts in consumer behavior and strategic retail developments.
Office Sector Remains a Pillar
The office segment continues to dominate deal activity, with transactions worth £189 million recorded so far. This trend is expected to align closely with last year’s £255 million. One of the landmark deals this year was the sale of Argyle House, a noted brutalist office block situated near Edinburgh Castle.
Hotel Sector: A Resilient Performer
The hotel sector in Edinburgh has also shown notable resilience and activity, with deals amounting to £114 million, the second-highest in the past five years. Key transactions include the sale of Edinburgh’s Waldorf Astoria and several acquisitions on St Andrews Square for hotel redevelopment.
Diverse Investor Profile
The investor profile in Edinburgh’s commercial property market is diverse. Institutional buyers account for 41% of the investment volumes in 2023, with international investors making up another 37%. Edinburgh’s market alone represents about 46% of the total investment in Scottish commercial property this year.
Why Edinburgh?
Alasdair Steele, the head of Scotland commercial at Knight Frank, attributes the robustness of Edinburgh’s market to several factors:
- Strong Fundamentals: The city continues to offer compelling reasons for investment, including a strong occupier market.
- Limited Development Sites: The scarcity of development sites in Edinburgh, coupled with the conversion of office spaces to other uses, adds to the market’s attractiveness.
- Revival of the Hotel Market: Post-lockdown, the hotel market has seen a significant bounce-back.
- Retail Market Adjustments: The retail sector in Edinburgh is adapting to new market conditions and consumer preferences.
Looking Ahead
Steele concludes with optimism, noting that buyer and seller expectations are aligning more closely. This trend, combined with several assets currently on the market, suggests a potential increase in deal activity before the year ends and a promising start to 2024.