Commercial property investment volumes in Scotland totalled £2.395 billion in 2022, marking a 12.6% uplift on the five-year average (£2.127 billion), according to the latest research from Savills.
The analysis, which accounts for all commercial property sectors, sets out a year of two halves with Savills recording 81%, (£1.93 billion) of the total investment activity in Scotland completing before the end of June.
Offices, retail warehousing and alternatives were the strongest performers by sector over the course of the year, says Savills, with key deals including: Pontegadea acquiring 177 Bothwell Street for £215 million (4.5% Net Initial Yield); Realty Income acquiring Great Western Retail Park for £87 million (5.96% NIY); Eurofund Group & Henderson Park Capital Partners buying Silverburn Shopping Centre for £140 million (9.3% NIY); Ares Management acquiring Westway Industrial Park in Renfrew for £111 million (5.10% NIY) and Apollo Global Management paying £161 million (4.90% NIY) for a CA Ventures Portfolio of three assets including two in Scotland.
In total Glasgow and Edinburgh each recorded 11 office transactions throughout the year, says Savills.
Savills reports the performance in the second half of 2022 was significantly impacted by the effects caused by the war in Ukraine, coupled with the economic shocks from the sharp rises in both the inflation rate and cost of debt, as investors largely stepped back from the market. The weak performance of H2 in 2022 was down 310% compared to the same period the year previous, the firm reports.
Stuart Orr, investment director at Savills in Glasgow, says: “The overarching approach of investors in Scotland at the beginning of this year remains ‘wait and see’. Investors need more certainty in the economic outlook to be confident in their ability to underwrite new deals, albeit the shocks to the market that followed the mini-budget are easing.
“With an expectation that inflation has peaked, and interest rates are likely to stabilise further, sentiment is improving. There remains a sizable amount of capital that investors will be keen to deploy over the course of the year, as holding large cash balances indefinitely is not a viable strategy in this inflationary environment.”