Scotland now represents the second largest investment region outside London. Last year commercial property deals north of the border surged by 82 per cent.
But despite a survey by consultants Jones Lang LaSalle (JLL) claiming that a total of £3.2bn was pumped into the country’s real estate market last year, a second CBRE report warns that office space in Edinburgh is about to hit its lowest level in more than a decade.
“The fundamentals of the Scottish economy, including strong increases in gross domestic product and low unemployment, all pointed to a compelling economic performance which would have resonated positively with investors looking for performance,” commented JLL’s lead director for Scotland, Alasdair Humphery.
According to a JLL end of year report, direct property investment in Britain as a whole hit a record £65bn last year — three per cent higher than the 2006 pre-recession peak and up 16 per cent on the 2013 total of £55bn.
With the UK now the second biggest commercial property market in the world — accounting for 18 per cent of all global transactions — it’s not surprising that London recorded £27.5bn worth of transactions last year. Around £17.5bn was global money, making the UK capital the leading international investment target.
“We have noticed that British investors are more open to risk and are increasingly looking beyond London to find better returns in the stronger UK regional cities,” explained Humphery. “This has contributed to the perception that Scottish commercial property investment offers a good risk-to-reward in a continuing uncertain global economy.”
Last year witnessed what is believed to be Scotland’s largest office deal, when Legal & General Property bought and forward funded the £127m development of the 335,000 sq ft headquarters for oil services group Aker Solutions in Aberdeen.
The momentum appears to have carried into 2015, with the Scottish Widows’ headquarters in Edinburgh changing hands last month for a city record of £105m. After attracting bids from a number of UK and overseas investors, the Port Hamilton building was sold by Aberdeen Asset Management to an overseas private client of HSBC Private Bank.
But with the commercial take up in the Scottish capital rising to a 10 year high last year, CBRE has cautioned that the amount of “ready to occupy” offices fell for the third year in a row, with just 439,500 sq ft of newly completed space now available on the market.
“This was down 60 per cent since the supply peak of 2009,” the consultancy said in a statement, “with levels expected to fall still further in 2015.” Overall supply in the city is set to become the lowest since 2004.
CBRE also said that supply levels have continued to fall in Glasgow, after concerns that the independence referendum would affect occupier confidence proved unfounded.
