This year we are on track to exceed the £2 billion invested in Scotland’s commercial real estate in 2017, with £1.74 billion already transacted in 2018 and a further £265 million currently under offer as we approach the final quarter. Volumes are 90 per cent ahead of the same point last year, suggesting that 2018 will be one of the strongest recorded in terms of investment volumes in the last decade.

The office sector has taken the lion’s share of activity with £746 million transacted in the year to date (YTD). In previous years the majority of office investment has occurred in Edinburgh, yet in 2018 more than 50 per cent of the total volume has been transacted in Glasgow. Having lived in the shadow of Edinburgh for many years, is the city seeing the beginning of a resurgence? Among UK investors, who have accounted for 60 per cent of Glasgow’s office deals by volume so far this year, it certainly seems so. 

Their confidence in Glasgow is the consequence of four factors: a positive supply and demand ratio; one of the lowest rental levels of the Big Six regional cities, implying room for growth; rising headline rents and reducing incentives are now evident; and, most influentially, at the current prime yield of 5.25 per cent – only 25 basis points keener than last year – Glasgow offers an attractive discount when compared with Edinburgh.

In other sectors, £400 million has been invested in retail warehousing, up from £60 million last year and contrasting with retail high street deals, of which there have only been four. Growing appetite for alternative assets has seen £300 million traded, including the Waldorf Astoria and Jury’s Inn both in Edinburgh. Enthusiasm for Scotland’s industrial assets also remains strong, albeit deals are limited due to a lack of stock (£230 million of deals have completed across 25 transactions in 2018 YTD).

Scotland continues to offer both UK and overseas investors attractive opportunities that are perceived as good value in the context of the wider UK investment market. While investor demand continues to push down office yields in Edinburgh, there’s growing interest in Glasgow which, with large developments underway, is on the cusp of significant change and investors are buying into this. Meanwhile, deals are happening in Aberdeen for buyers attracted to the considerable discount on offer.

However, the strength of Scotland’s investment market is not confined to offices, but rather reinforced by the further appetite for the country’s retail warehousing, industrial and alternative assets.

Further information

Read more: 2018 to see over £2bn invested in Scotland's commercial property