Scottish commercial property investment shows signs of recovery

Oliver Kolodseike

Commercial property investment in Scotland showed signs of recovery and further growth is expected as Covid-19 restrictions ease, Colliers has revealed.

A new analysis showed that more than £400 million was invested during the second quarter of 2021, up from the same period of 2020 and up from £372m transacted in the first quarter of 2021.

The effects of the Covid-19 pandemic continued to be felt, however, with investment at about 20 per cent below the five-year quarterly average of £528m.

Colliers pinpointed signs of recovery though, with transactional activity much stronger than a year ago. At the half-year mark, investment volumes were up by more than 50 per cent on the same time as last year.

Oliver Kolodseike, deputy UK chief economist, research and forecasting, at Colliers, said: “While investment in the second three months of this year was still well below the five-year quarterly average, there are reasons for optimism.

“There is pent-up capital waiting to be deployed in Scotland. A number of deals are currently under offer and should complete in the coming weeks and months.

“We expect a further boost with remaining restrictions due to be eased in Scotland on 9 August and we should return to some form of normality.”

Colliers found that just over £100m was invested in the alternative, or mixed-use, sector in the second quarter of the year. While this is down from almost £200m in the first three months of 2020, it was only slightly below the five-year quarterly average of £111m. This sector accounted for over 40 per cent of all activity by value in the first six months of the year. In the largest deal in this sector, LCN Capital bought the Alba complex life sciences campus in Livingston for £45 million.

Offices made up almost half of all investment in the second quarter as transactional activity picked up, with over £180m invested. This was three times the first quarter figure of £60m and above the five-year quarterly average of £165m.

The four largest office deals in the second quarter were all recorded in Edinburgh, led by Rockstar Games buying its own building on Holyrood Road for £31m and the adjoining Holyrood Park House for £17m.

In the industrial sector, investment reached around £70m in the second quarter, up from £52m in the first three months of the year, and around 10 per cent above the five-year quarterly average of £62m. The largest deal was DataVita’s acquisition of the Fortis data centre at Strathclyde Business Park for £45m.

Turning to retail, around £60m was invested in the second three months. Although this was double the first quarter figure, it is less than half the five-year average of £130m. The largest retail deal was the sale of a B&Q retail warehouse in East Kilbride to an American REIT for £19m.