Commercial property market on ‘road to recovery’ in Scotland

Alasdair Steele

SCOTLAND’S commercial property market is on the ‘road to recovery’ according to new analysis from Knight Frank.

Investor appetite for industrial and retail warehousing assets is helping to drive activity, with research uncovering that £1.2 billion has been invested in Scottish commercial property in the first three quarters of 2021 – up 20.78% on the equivalent period last year.

Overseas investors account for just over £500 million (41.81%) of overall volumes. Private property companies represented another £322 million.

Knight Frank said the industrial sector has attracted £259 million of investment in the last nine months – more than double 2019’s £109 million and 2020’s £112 million. Retail warehousing accounted for £232 million in the first three quarters of 2021, compared to £213 million and £117 million in 2019 and 2020.

Alasdair Steele, head of Scotland commercial at Knight Frank, said, “Our figures suggest that Scotland is edging closer towards the level of activity we saw prior to the Covid-19 pandemic. While there is still some way to go, the economy was locked down for much of the first half of the year and there has been a noticeable upturn in investor sentiment since the start of the summer.

“Industrials and retail warehousing have seen the clearest upturn in activity, with investment volumes more or less doubling in both markets. Prime offices remain in high demand and, although investment volumes in offices are still some way off where they were in 2019, we expect to see more activity in this sector towards the end of the year and into 2022.

“There is a weight of money looking to be invested and good quality stock coming onto the market. We expect that to drive deal activity in the final quarter of the year and, with that, we could begin to see prime yields fall – as has already been the case with some recent deals in Edinburgh.”