It noted that international investors were the most active buyers, accounting for 62 percent of investment volume.
Scotland sees huge increase in commercial property transactions
The firm said Lone Star Property Fund's £111m acquisition of Union Square accounted for the majority of investment in Aberdeen, with retail accounting for two-thirds (67%) of the total over the six month period. Industry was the second most active sector (15%), with hotels in third place (13%).
Union Square is home to a variety of shops and restaurants, as well as the Leonardo Hotel and the 10-screen Cineworld multiplex cinema. The building was sold by Hammerson to global private equity firm Lone Star.
Alasdair Steele, head of Scottish commercial at Knight Frank, said while transaction activity had generally slowed due to uncertainty about the timing of interest rate cuts, Aberdeen's investment market was “relatively strong, supported by the sale of Union Square”.
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He noted: “Aberdeen has also seen significant activity in the industrial and hotel sectors. More generally, market sentiment is cautiously optimistic and we expect to see increased activity in Aberdeen and across Scotland over the next six months.”
Elaborating further on the reasons for Aberdeen's strong performance, Matt Park, partner at Knight Frank Aberdeen, said: “Aberdeen's occupancy market is recovering from the pandemic-era downturn and settling into more stable levels of activity.”
“That's starting to permeate the investment market, and while the first half of 2024 may have been biased by the sale of Union Square, we're seeing much more interest in other assets on the market, particularly those with the opportunity to increase value through redevelopment potential or strong asset management.”
Euan Kelly, capital markets partner at Knight Frank Scotland, agreed that the Union Square sale had “slightly skewed” the figures but reiterated that interest in Aberdeen, particularly from international investors, was currently on par with other major cities. “Aberdeen has vacant property which offers the high yields and income that investors are looking for,” he said.
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“The problem in the Central Belt is a lack of stock, so yield-focused buyers are turning to Aberdeen where there are more deals available.”
Asked if recent significant investment in services, facilities and infrastructure in Aberdeen and the north-east had influenced investors, Mr Kelly replied: “No. I think the issue is simpler than that. Aberdeen is well placed to deliver the returns investors are looking for.”
In April, property firm Lismore Real Estate Advisors highlighted several big deals that had closed in the first quarter of 2024, including DS Properties' £16m acquisition of BP's North Sea headquarters in Dyce, near Aberdeen.
Commenting on the situation across Scotland, Chris Thornton, associate at Lismore, said: “Key themes are emerging across a range of sectors, with logistics and multi-lease warehousing continuing to lead the way, with strong demand and limited supply driving real rental growth and the case for investment.”
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“We are seeing signs of increased fund activity focused on luxury retail, retail warehousing, hotels and the industrial sector. Corporate mergers and acquisitions are on the rise, leading to motivated sellers and portfolio restructuring.”
He also noted that Aberdeen is experiencing improved liquidity, with a significant increase in transaction volumes for office and industrial property, attracting yield-focused buyers.”