Scotland’s commercial property sector saw £2.39bn traded in 2022, marking a 12.6% uplift on the five-year average.
The analysis from Savills, which accounts for all commercial property sectors, sets out a year of two halves, with the company recording 81% - or £1.93bn - of the total investment activity in Scotland completing before the end of June 2022.
Offices and retail warehousing were the strongest performers by sector over the course of the year, with key deals including Pontegadea acquiring 177 Bothwell Street for £215m (on a 4.5% net initial yield), Realty Income acquiring Great Western Retail Park for £87m (5.96% yield), Eurofund Group and Henderson Park Capital Partners buying Silverburn Shopping Centre for £140m (9.3% yield); Ares Management acquiring Westway Industrial Park in Renfrew for £111m (5.10% yield) and Apollo Global Management paying £161m (4.90% yield) 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.
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 was down 310% compared to the same period the year previous, Savills reported.
Stuart Orr, the firm's investment director in Glasgow, said: “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,“ Orr continued, adding: “There remains a sizeable 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.”
Meanwhile, Knight Frank analysis suggested that office take-up in Aberdeen rose by 96% last year, compared to 2021, buoyed by the sustained high oil price.
The commercial property consultancy said that office take-up reached 385,583 sq ft in the Granite City during 2022, after 81,231 sq ft of office space was transacted in the final quarter of the year.
Last year’s figures received a major boost from Shell taking more than 100,000 sq ft at The Silver Fin Building in the first quarter. Around 281,000 sq. ft. of the deals - or 73% of the total - involved energy and supply chain companies.
A significant amount of the remaining space was taken by professional services companies that advise the city’s energy industry, including law firm Gilson Gray securing around 4,500 sq ft at Blenheim Gate.
With several deals carrying over into 2023, Knight Frank said there was cautious optimism in the city going into the first quarter of the new year.
Matthew Park, partner at Knight Frank Aberdeen, said: “Last year was much more positive for the city’s commercial property market, following two years of pandemic-related disruption, we expected take-up to reach 400,000 sq ft, but some of the deals have taken slightly longer to get over the line and should conclude in the first quarter of 2023.
“With the UK Government offering the potential of more than 100 new awards in the last North Sea licensing round, there are reasons to be cautiously optimistic for the year ahead.
“However, the windfall tax and the SNP/Greens’ recent announcement on their intention to wind down North Sea oil and gas activity are becoming factors in many energy companies’ investment plans for the years ahead.
“In turn, they could begin to have an impact on the city’s property market.”
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