Top five spot for city
Edinburgh moves up world property rankings
More value and variety for investors
Edinburgh’s increasing appeal among the international investment community has seen it break into the world’s top five cities within a global property investment index.
Edinburgh is ranked fourth for overall Investment Intensity, behind only Oslo, London and Munich.
The JLL Investment Intensity Index compares the volume of direct real estate investment over a three-year period relative to the city’s current economic size.
It provides a measure of real estate market liquidity, as well as a useful barometer of a city’s overall ‘health’, highlighting cities that are punching above their weight in terms of attracting real estate investment.
Earlier this year, JLL published figures showing that international investment, as a proportion of total investment, in Edinburgh’s office market increased significantly in 2016, with more than 90% of purchases accounted for by overseas investor, compared to just 50% in 2014.
Elsewhere in the report, Edinburgh takes the top position for Investment Intensity in the Hotels sector and also occupies second place in the retail sector and 15th in the Offices sector.
It is one of only three cities – together with Oslo and Copenhagen – to rank among the Top 20 markets for investment intensity in more than two sectors.
Alasdair Humphery, lead director for JLL in Scotland, said: “In recent years, Edinburgh has increased its visibility among the overseas investment community, but to break into the top five is a great boon for the city.
“There are a number of key reasons for its rise up the rankings. As a mature and transparent market with low levels of development, Edinburgh is not at risk of over supply which can depress growth. Allied to its strong fundamentals is its flexibility in the face of changing markets.
“The city centre is unique in its ability to accommodate a variety of different uses for land or obsolete buildings, which has been true even during tougher economic times.
“Finally, while the Capital’s commercial property market has been built on strong financial and professional services foundation, its recent growth in the tech sector, in particular, has provided it with a springboard to move forward as a ‘New World’ city, offering much more value and variety to investors worldwide.”
JLL reported in January that Scotland was drawing overseas investors because of the low pound while domestic demand was depressed as a result of political uncertainty.
Overseas investment rose against an overall fall. While the capital’s total office investment volumes dipped from nearly £400m in 2015 to £355m in 2016, the percentage of overseas buyers increased from 62% to 93%.
New overseas investors likely
A number of new international investors could emerge in Scotland over the next 12 months, particularly among private overseas buyers, according to Knight Frank.
New sources of money were likely to appear in 2017, with interest already coming in from countries such as South Africa and China. According to 2016’s investment figures, over two-thirds of investment in Scottish commercial property came from overseas – a significant proportion of which is likely to have been from ultra-high-net-worth individuals.
Knight Frank’s annual Wealth Report showed that £1.17 billion of the £1.78 billion spent on Scottish commercial property, including offices, hotels, retail outlets, student accommodation, and industrial units, was international money. The figure was the highest for more than a decade, eclipsing the average of 30.17% recorded by overseas investors in the past ten years.
Edinburgh proved particularly popular with overseas investors – £966 million of the £1.19 billion spent in the city came from international sources; equivalent to 81.14%. Meanwhile, investment from abroad made up about a third of spending in Glasgow, 32.92%.
> Savills reports that overseas investors ploughed £5.8 billion into the UK’s regional commercial property market in 2016, growing to account for almost one third (29%) of the total investment outside of London, with hot spots in Edinburgh, Manchester and Cardiff.
In 2014 and 2015, when investment volumes in the UK regions were at an all time record, overseas investors represented an 18% (£4.1bn) and 27% (£6.1bn) market share, respectively, of the total turnover.