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Subdued demand

Commercial property investment falls by half

Investment in Scottish commercial property fell by almost half last year as lockdown measures curtailed international appetite for deals.

Transactions worth £1.2 billion were completed compared to £2.074bn in 2019. Office volumes dropped from £759 million in 2019 to £347m.

Scotland remained the most popular UK destination for overseas investment outside London and the South East with 21% of the market outside this area.

Analysis from commercial property consultancy Knight Frank found that international investors accounted for £654m of investment in Scotland’s commercial property last year – just over half (52%) of the total figure.

150 Broomielaw

Broomielaw offices in Glasgow sold for £40m

Significant transactions included the £65m acquisition of Amazon’s Dunfermline fulfilment centre – the largest-ever logistics deal in Scotland – as well as Apache Capital Partners and Harrison Street’s £215m funding of the Springside build-to-rent scheme in Edinburgh.

In the offices sector, German fund KanAm bought Edinburgh’s Quartermile 3 for around £45m, while Singapore-based Elite Partners Capital acquired 150 Broomielaw in Glasgow for £40m.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “A number of trends took hold relatively early during the pandemic and were borne out as it evolved, namely a flight to quality stock and the rise of the industrial and logistics sector, which you can see in the major Scottish deals concluded last year.

“While activity is likely to be constrained early in the year with lockdown measures still in place, there remains a weight of money waiting to be deployed by investors.

“We expect that to support a rebound when vaccination programmes are more widely rolled out and restrictions on movement begin to lift, with deals already being talked about for later in 2021.

“Of course, the situation is changing all the time, but we continue to be cautiously optimistic.

“Quality offices, along with the industrial and logistics sectors, were in demand throughout the pandemic and that looks likely to remain the case. So too does Scotland’s attractiveness to overseas investors and the insatiable appetite for secure, long-term income, which commercial property can provide.”

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