Investment in Scottish CRE drops by a fifth in H1

Investment in Scottish commercial property dipped to £750m in the first six months of 2024 from £922m the previous year – a drop of 19%. Knight Frank attributed the decrease to uncertainty over interest rates. The agent’s analysis of RCA data found that H1 2024 investment into the Scottish commercial property sector was 22% below the five-year average of £954m. However, it was more than double 2020’s £447m. Investment into retail property in Scotland represented 51% share of the total investment volume in H1. Hotels made up another 19%, while offices and industrials accounted for 16% and 10% respectively. According to Knight Frank, REITs and listed property companies were the most active buyers, with a 32% share of investment volumes. International investors accounted for another 30%, while private capital made up another 20%, highlighting the increasing diversity of the buyer pool for Scottish commercial property. Despite the overall fall in investment volumes, Knight Frank said there had been a recent pick-up in activity, with its capital markets team having recently completed on a flurry of deals totalling well over £100m. These included the sale of Edinburgh’s 40 Torphichen Street and, in Glasgow, the acquisition of 1 West Regent Street and a deal for a large multi-storey car park. Alasdair Steele, head of Scotland commercial at Knight Frank, said: “At the start of 2024, it looked likely that interest rates would be cut at least once in the first six months of the year and, as a result, we had a much stronger Q1 than 2023. However, a mixed set of inflation figures and economic indicators in the first few months, combined with the calling of the general election, meant many investors paused decision-making during the second quarter to see if a clearer picture would emerge. “While that uncertainty has slowed transactions, there has still been a relatively healthy level of deal activity and interest – particularly in recent weeks. The headline figure for the last six months might not paint the best picture, but the reality on the ground feels a bit more positive. “The spread of different types of investors in the last six months is also worth noting. Over the last decade international buyers have come to account for the majority of investment in Scotland, but in the year to date there has been a much more even share, with institutional investors buying as well as selling, alongside increased interest from private equity and property companies. A deeper pool of buyers can only bode well for the remainder of 2024.” Image © Jason Briscoe/Unsplash