Scottish property investment dives amid lockdown but 'robust rebound' on cards

Property investment volumes in Scotland fell at the start of this year as lockdown restrictions hit deal-making but experts are predicting a “robust rebound” in the months ahead.

Colliers’ Scottish snapshot for the first quarter of 2021 reveals that investment volumes fell to £149 million, a sharp decline on the £335m recorded in the final three months of 2020, and more than 70 per cent below the five-year quarterly average of £536m.

However, investment activity at the start of this year has been much stronger than during the first lockdown in quarter two of 2020, when just £50m was transacted.

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The largest deal of the latest quarter was Ares Management’s purchase of 301 student beds in Glasgow for £35m, which contributed to the student accommodation sector bucking the generally low level of activity, with investment volumes 20 per cent above the five-year average.

Honeywell, Newbridge, Edinburgh, acquired by Colliers in March 2021, on behalf of Longmead Capital.

In the retail sector, deal activity came to a virtual standstill in the first quarter, totalling less than £10m. This was down from £51m at the end of 2020 and well below the five-year quarterly average of £128m. One notable deal involved the sale of 75 George Street in Edinburgh sold to an unnamed investor for £5.75m.

Patrick Ford, director, national capital markets at Colliers in Glasgow, said: “Unsurprisingly, given renewed lockdown restrictions, it has been a slow start to the year in terms of commercial property investment in Scotland However, we expect to see a robust rebound in investment volumes throughout this year, thanks to a significant build-up of capital waiting to target the market.”

Office investment sales dropped to £55m in the first three months of the year, from £136m in the last quarter of 2020 and below the five-year quarterly average of £170m.

However, the sector shows an improvement on the second quarter of 2020 – the first national lockdown – when no office transactions were recorded, and there are signs of continued improvement.

The sale of the Cuprum Building in Glasgow, covering 99,600 square feet of office space, to Trinova Real Estate for £28.2m was the biggest deal of the first quarter by value, for the sector.

Just over £30m was invested in the industrial sector, down from £94m at the end of 2020 and about half the five-year quarterly average of £61m.

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The largest industrial deal of the first quarter was the sale of a 124,000 sq ft distribution warehouse at Eurocentral to Lothian Pension Fund for £14.3m.

Ford said: “Looking at occupier activity, the industrial sector remains relatively buoyant and there are signs of renewed interested across the board in Scotland with some normality set to return as we slowly emerge from lockdowns. In the office sector, for example, we’re expecting some recovery in the second half of this year.”

In retail, as more shops re-open and the vaccine roll-out continues, Colliers expects to see some improvement in consumer confidence. However, rents will continue to fall as more companies enter administration.

“With over half the adult population in Scotland now vaccinated and a roadmap for the easing of restrictions in place, we’re hopeful of a pick-up in the economy in the coming months,” Ford added.

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