The amount of money invested in Scotland’s commercial property went up in the second quarter of 2023, but the picture is mixed.
- Investment Amounts:
- Scottish commercial properties received an investment of £320m. That sounds impressive, but how does it compare? Well, in the first quarter, it was £250m. So, there’s a jump there. But, if we compare it to the average over the last five years, it’s 35% less than the usual £490m.
- How Many Deals?
- There were 30 deals in the second quarter. If we break down the total investment by the number of deals, the average deal size was £10.7m. This average is more than the £8.6m in the first quarter and just a tad below the five-year average of £11m.
- Yearly Comparison:
- When we look at the first half of this year, the total investment is £570m. But, hold your horses! This is 66% less than the first half of 2022.
- Why this Change?
- Oliver Kolodseike from Colliers (they did the research) shared some insights – “As with all markets across the UK, Scotland is no stranger to the limiting impact that high interest rates, cost of living and the cost of construction is having on the market. While there’s no silver bullet that can help, it would seem we are reaching peak in interest rates and as such some pressures should ease as we head towards next year.”
- Specific Sectors:
- Hotels: They made up 35% of the total investments this quarter, which is £110m. The major deal here was the sale of The Caledonian in Edinburgh for £85m.
- Offices: They had 28% of the pie with investments reaching £90m. The big deal here? The sale of Glasgow’s 191 W George Street for £36m.
- Retail: Their share was 17% with £50m. This was a decline from the first quarter, which had £110m.
- Industrial: Not much action here. Investments stalled at less than £10m in the second quarter. They had a better first quarter with £90m, but overall, they’re down 70% from 2022.
- Comments from the Experts:
- Elliot Cassels from Colliers Scotland believes most investors are interested in ‘beds and sheds’. But there’s a mismatch between what sellers expect and what buyers are willing to pay, leading to a dip in transactions. However, with experts predicting the peak of interest rates and a potential drop in inflation, 2024 might be a sunnier year for investments.
In a nutshell
While Scottish commercial property investments have seen a rise from the first to the second quarter, they’re below the average when we look at the past five years. Different sectors like hotels, offices, and retail have their ups and downs, but experts are hopeful for a better 2024.