Scottish commercial real estate investment up a quarter last year

The Scottish commercial property investment market grew 24% last year, with around £ 1.3bn invested in the sector.

Lismore Real Estate Advisors analysis said while the emergence of the Omicron variant and the return of restrictions continue to pose problems, fourth quarter trading remained strong at £ 520million, up 27% compared to the same period in 2020.

Several deals that led to this, including the £ 32.2million sale of Sainsbury’s to Inglis Green Road in Edinburgh by Inglis Property to Urbium Capital Partners, the off-market sale of Scania to Eurocentral by West Ranga Property Group to DVS Property for £ 10.7million, and the £ 58million sale of Exchange Place One in Edinburgh to CBRE Investment Management.

Lismore predicts that the three best performing sectors in 2022 will be retail warehousing (36%), distribution (28%) and industrial multi-premises (17%).

Although prime yields have started to harden, retail warehousing still offers good value given the rapidly changing retail market and strong professional demand, according to the real estate advisor.

Support for grocery stores fell 6%, while the office sector was the worst supported by respondents to its research, with concerns about investment needs and future work habits cited as headwinds for the sector.

About 69% of those surveyed in Lismore’s study expect to be net buyers in 2022, with 21% being neutral.

Investment managers and real estate companies appear to be the buyers the most, with 83% and 73% respectively anticipating that they will be net buyers in 2022. Just over half of the funds and private equity firms surveyed are expect to be net buyers.

Only 10% of those surveyed expect to be net sellers, suggesting another year of limited stock and inevitable pricing pressures for the best opportunities.

Chris Macfarlane, Director of Lismore, commented: “The wall of foreign capital hunting continues and prices have reached pre-pandemic levels in the grocery, logistics and warehousing sectors. Retail.

“The only sector that really offers value-added pricing is the shopping center market where the risk remains but where the best assets are starting to find their level, between 50 and 90% off compared to purchase levels.

James Dunne, UK Head of Transactions at abrdn, said: “The pandemic has highlighted the benefits of having a diversity of incomes and industries within a portfolio.

“The breadth of alternative sectors provides a growing share of the real estate investment market, with the hotel sector offering an interesting sustainability model – however, this recovery trend has been narrow and will continue to be driven by the best assets and the best locations significantly outperforming the market.

He added: “The extended stay market (aparthotels and serviced apartments) was already growing and the ability to move from more lucrative short stays to a longer term model provided income certainty and meant that the sector has shown very strong resilience throughout the worst of the pandemic – and therefore a strong justification for investing both for downside protection – but also for expected performance in a more normal market. “

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