Investments in Scottish commercial real estate grow in 2018
The Scottish commercial real estate is booming in 2018, but at the start of the year this looked far from likely. After a rather slow 1Q start, levels of investment achieved record highs for 2Q18. A total £1.4bn has been invested in Scottish commercial real estate in 1H18, which is indicative of an 86% rise over FY17A investments. This level of real estate investment is markedly above the average volume growth for the entire UK, which is currently around 23%.
It hasn’t all been plain sailing for Scottish commercial real estate in 2018. The 1Q18 stats suggested the year was going to be slow, with retail investments down quite significantly to just £41m. A few deals from 2017 were finalised in 1Q18, which raised the “adjusted” total significantly, and a number of high value but smaller deals did lift overall total investment to £608m. Over 80% of 1Q18 transactions were in the office and alternative sectors https://sbnn.co.uk/2018/04/09/scottish-property-investment-value-in-q1-exceeds-five-year-average/
Much of this strong 2018 growth has been driven by investment into Scotland’s major cities, with £692m invested in Edinburgh and £344m in Glasgow. Surprisingly, though, Aberdeen topped the commercial real estate investment table 1Q18, booking total sales values of £166m compared to £164m for Edinburgh and £96m for Glasgow. Aberdeen’s 1Q18 commercial real estate figures included the sale of the Aker Solutions campus at Dyce for approximately £114m and the Stat Oil complex located at Prime Four Business Park for £18.7m http://www.costar.co.uk/en/assets/news/2018/June/Aberdeen-leads-the-way-as-Scottish-Q1-investment-figures-soar/
The caution displayed by institutional investors in Scotland since the Scottish Referendum and Brexit now seems to have been replaced by greater confidence in the commercial real estate sector.
UK funds are now showing far greater activity in the market and this has been bolstered by investments from around the world. The UK investor, Hermes Real Estate, recently purchased the 550,00 sq ft Glasgow Skypark development for around £80m and Aberdeen Standard Investments bought an Edinburgh 113-unit build to rent residential block for £27.5m. Manchester-based Rockspring Property Investment Managers purchased 9-10 St Andrew Square, Edinburgh, a prime office and retail opportunity, for £25.75m.
It should be noted nevertheless that although most investment purchases were in the commercial property (office) sector, the sale of Edinburgh’s Fort Kinnaird Retail Park for £167m enhanced retail figures.
The opportunities in commercial property remain rich and the £85m purchase of the Waldorf Astoria hotel (hospitality) highlights just how diverse the commercial real estate investment opportunities in Scotland can be.