Scottish property investment market to cool after bumper first half

Scotland’s property investment market is likely to cool over the next couple of months after a bumper first half, a fresh snapshot of the sector suggests.

Investment volumes in the first six months of this year were the strongest they have been since 2018 as the market continued its recovery from the pandemic, according to new analysis from property advisor Knight Frank.

The firm found that £1.2 billion of commercial property deals were agreed between January and June 2022, up 54 per cent on the same period last year. The figure is also 21 per cent ahead of the five-year average - albeit, this was skewed by low investment volumes during 2020 and, to a lesser degree, 2021, amid the economic fallout from the pandemic.

Overseas investors represented more than two-thirds (68 per cent) of the total investment figure, equivalent to £843 million, with UK property companies the second most active buyers, totalling £296m or 23.9 per cent of overall investment volumes.

Investment in retail assets increased by more than 55 per cent on 2021, rising from £148m to £230m, with retail warehousing accounting for £165m of the total figure. Offices were the most popular asset class with £410m-worth of deals, boosted by the sale of HFD Group’s vast 177 Bothwell Street development in Glasgow, in what is believed to be a record transaction for Scotland.

Edinburgh saw £400m of investment, while Glasgow accounted for £329m,a breakdown of the latest data shows. Deal activity in Aberdeen continued to pick up, reaching £189m, largely from the sale of two retail warehousing assets.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of the year has underlined a couple of key trends that have emerged over the last two years: retail warehousing and industrials remain in high demand, while prime offices are highly sought after - underlined by the deal for 177 Bothwell Street.

“Similarly, overseas investors accounting for such a high share of investment during the last six months also highlights the strength and depth of the buyer pool for Scottish commercial property.”