Scotland’s commercial property sector has bounced back with a vengeance in the early months of 2024.
The first quarter of 2024 has seen an upswing in Scotland’s commercial property investments, according to the latest figures from Knight Frank, a leading commercial property consultancy. Investments soared by 53% compared to the same period last year, jumping from £251 million to an impressive £383 million. This significant increase signals a robust recovery and growing investor confidence in the Scottish market.
Where’s the Money Going?
A closer look at the investment distribution reveals some interesting trends. Retail properties are the belle of the ball, capturing 56% of the total investment volume. This surge was largely driven by the sale of Union Square in Aberdeen for a cool £111 million. Not to be outshined, the hotel sector snagged 17% of the investment pie, with office spaces claiming another 15%.
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Aberdeen, in particular, is wearing a celebratory hat, marking its best first quarter in the past five years, boasting £140 million in deals. Glasgow is not far behind, showcasing a robust recovery from the previous year with investments climbing to £109 million, marking a staggering 123% increase.
Who’s Investing?
The investment landscape in Scotland is quite diverse, with listed property companies leading the charge, accounting for 43% of the investments. However, international investors, who traditionally have been major players, contributed 30%, a drop from their five-year average of 57%. Private capital is also making its presence felt, representing 27% of the investments.
An Optimistic Outlook
Despite the hurdles of the past year, including rising interest rates and economic adjustments post-pandemic, the mood is cautiously optimistic. Alasdair Steele from Knight Frank notes, “Last year was challenging for commercial property across the world, with interest rates rising sharply after a decade of historic lows and the economy adjusting to a new normal post-pandemic. While there was some mixed inflation data moving into 2024, a cautious sense of optimism has begun to emerge. Although we are not quite back to pre-pandemic levels, there is a noticeable difference between now and this time last year as macro-economic conditions settle, and buyer and seller expectations move closer together. The particularly good news is that it looks like there is still plenty more to follow this year – international investors weren’t as active in the first quarter, but are still very interested in Scotland.”
Emerging Trends and Deals
Separate analysis by Lismore Real Estate Advisors paints a similar picture of growth, with transaction volumes hitting £431 million, up 33% year-on-year. Noteworthy transactions include DS Properties’ acquisition of BP’s North Sea headquarters and various significant purchases in the retail and office sectors. This indicates a stabilisation in pricing and a healthy appetite across different property sectors.
Investment Hotspots
The logistics sector is leading the charge with robust demand and limited supply. Meanwhile, prime retail, retail warehousing, and the hotel sector are seeing increased fund activity. The office market, particularly prime buildings, is also attracting attention with promising return potentials.