2025 is shaping up to be a year of opportunity for the Scottish real estate market, according to research within the quarterly review from Lismore Real Estate Advisors.
Q4 saw £406 million traded – up 6% on the same period in 2023. While volumes in Q4 are 4% below the five-year average, a number of deals are due to complete in early 2025.
The largest transaction of the quarter was in Aberdeen, with EEH Ventures concluding a £45 million acquisition of a trio of office buildings at the Prime Four Business Park from BMO. In Glasgow, Swiss Life acquired the city centre Maldron Hotel for £31.5 million from abrdn. Iroko Zen acquired Barrhead Retail Park for £14.6 millionfrom London and Scottish and at Eurocentral, 30 Coddington Crescent was acquired by AFH for £9.4 million from Ahli United Bank.
Lismore said its quarterly investor research shows a ‘good degree of optimism’. 88% of respondents see 2025 as a year of opportunity, with fund managers and investment managers particularly positive. Challenges include economic contraction and budget-driven pressures on retailers and recruitment. However, stabilised pricing and strong rental growth in prime industrial, high street retail, and selective offices fuel ‘cautious optimism’, with potential yield compression anticipated later in 2025, dependent on interest rate trends.
Investors predict that the top performing sectors will be industrial, living, and retail warehousing. Confidence has emerged as the most significant factor influencing the market, rising to 30% from 21% in Q4 2023.
Lismore director Simon Cusiter said, “Following a challenging period, the market shows clear signs of recovery, with investment volumes rising, interest rates easing and confidence returning. As our research has shown, investor appetite for real estate remains robust but highly selective.
“We expect 2025 to mark a more stable recovery phase, with investors focusing on sectors and locations primed for income growth. However, with interest rates expected to reduce slowly and inflation likely to remain slightly elevated, significant yield compression seems unlikely.
“Early 2025 is anticipated to see investors prioritising income potential over yield shifts, with momentum building as the year progresses. Scotland’s logistics and multi-let industrial market stand out, with rents remaining competitive compared to the UK and strong growth potential along the M8/M74 corridors and urban estates. Edinburgh’s central business district (CBD) office market is also promising, with demand exceeding supply for core city-centre spaces.
“The Build-to-Rent (BTR) residential sector presents untapped opportunities. Recent Glasgow transactions hint at returning BTR liquidity. Additionally, long-let, inflation-linked assets – especially in hotels and leisure – are drawing investor interest, due to attractive pricing relative to vacant possession values.”
