Lismore Real Estate Advisors, an independent property advisory firm, has published data which indicates that the commercial property market in Scotland is showing promising signs of recovery.
Transaction volumes in Q1 totalled £431 million, up 33% from Q1 2023, indicating a positive start to the year. Pricing is showing signs of stabilisation, with some sectors experiencing upward pressure. Logistics and multi-let sheds remain strong, with prime yields expected to slightly harden.
Notable transactions in Q1 include Lone Star’s acquisition of Union Square in Aberdeen for £111 million (pictured), DS Properties’ purchase of BP’s North Sea HQ for £16 million, ICG’s acquisition of Tesco in Corstorphine for £43.9 million, and an overseas private family office’s acquisition of Omni in Edinburgh for £64 million.
Chris Thornton, associate, said: “Key themes are emerging in various sectors, with logistics and multi-let sheds continuing to lead the way, with strong demand and limited supply driving genuine rental growth and underwriting investment rationale.
“There are early signs of an increase in fund activity focusing on the prime retail, retail warehousing, hotel, and industrial sectors. Corporate mergers and acquisitions are increasing, leading to motivated sellers and portfolio realignments. Notably, Aberdeen is experiencing improved liquidity, with a significant uptick in office and industrial volumes attracting yield-hungry buyers.
“Strong rental growth forecasts are driving interest from private investors in the drive thru’s sector, while private equity firms are starting to sense some real value leading to a number of high-profile acquisitions.
“In the office market, if you can buy prime buildings at 7.5%+ then there are signs of increased depth and if debt can be obtained at a sensible level, hitting double digit geared returns is achievable. Retail warehousing offers good value with prime yields at 6.50%-7.00%. The living sector remains attractive and despite slow development, investor appetite remains strong.
“Buyer activity increases, with funds expected to be net sellers but acquisition activity rising for the first time in 2 years, focused on “sheds and beds” but with high street retail and retail warehousing attracting attention. Private equity is seizing opportunities, such as Lone Star’s acquisition of Union Square in Aberdeen.
Overall, Scotland’s commercial property market shows resilience and recovery, offering various investment opportunities across sectors.”
