£300m of deals in pipeline
Property projects held up by ‘at least’ six months
4 North St Andrew Square was a £31m deal
A number of large property deals in Edinburgh and Glasgow worth £300 million are being held up by continuing uncertainty over the economy.
They are among key development projects in both cities which are set to be delayed by at least six months, says a new review of the property sector.
Chris Macfarlane, director of market newcomer Lismore Real Estate Advisors, says: “There are currently £300m in a small number of large transactions currently under offer in Glasgow and Edinburgh, but it remains to be seen whether these proceed or are renegotiated.
“Despite the uncertainty, Edinburgh will continue to succeed and remain attractive to UK and overseas investors, although the supply pipeline remains seriously constrained.”
Lismore’s first issue of Intelligence found that, not surprisingly, the majority of investors are focused on income protection and rent collection, while taking a “wait and see” approach to new opportunities.
Flexible offices will remain in demand, with only 5% of staff expecting to work a full five day week in the office post-COVID.
However as restrictions lift, the office will become “hugely important again” for forging a business culture and proving much-needed human interaction.
UK institutions remain focused on long-income investment, with build-to-rent, senior living, care homes and student accommodation being the sectors of choice for the remainder of the year and into 2021,
After an encouraging first quarter, the review shows that Scottish transaction volumes were down by about 70% against the five-year average over the same period.
Overseas investors will continue to dominate the Scottish market, specifically from Asia, GCC and mainland Europe (particularly Germany).
One of the key deals concluded during the quarter reinforces this trend with KanAm Grund Group acquiring 4 North St Andrew Square from Knight Property Group for £31m, reflecting a net initial yield of 4.3%.
Pricing for annuity grade prime stock offices and logistics is holding firm and there is limited evidence of transactional activity for mid/short term income assets.
The five-year take-up in Edinburgh is 870,000sq ft, with H1 being 150,000sq ft. Vacancy rates in the city are only 2.8% with new build Grade A even lower at 0.13%.
Lismore was founded in March to provide intelligent market advice, delivered by a team of directors in the investment and development market who have all previously held senior director roles and have collectively advised on over 400 transactions with a value in excess of £4billion.