Investment into Scottish commercial property fell in the first six months of 2024 as uncertainty around interest rates caused investors to pause their consideration in the second quarter, according to new data from Knight Frank.
Analysis of data from independent commercial property consultancy RCA has found that around £750 million was invested in Scottish commercial property between January and June 2024. This is 19% down on the £922 million in the same period last year and 22% below the five-year average of £954 million, but more than double the £447 million in 2020.
Figure 1: Total investment in Scottish commercial property H1 2020 to 2024
Source: RCA, Knight Frank
By sector, retail real estate dominated investment at 51% of total investment, followed by hotels at 19%, and office and industrial at 16% and 10%, respectively.
Real estate investment trusts (REITs) and listed property companies were the most active buyers, accounting for 32% of investment values. International investors accounted for a further 30% and private capital a further 20%, highlighting the increasing diversification of the buyer base for Scottish commercial property.
Knight Frank said that despite the overall drop in investment volumes it has seen an uptick in activity recently, with its capital markets team recently completing a series of transactions totalling well over £100m, including the sale of 40 Torfitchen Street, Edinburgh, and the acquisition of 1 West Regent Street, Glasgow, along with a major multi-storey car park deal.
Alasdair Steele, head of Scottish commercial at Knight Frank, said: “The start of 2024 is expected to see at least one interest rate cut within the first six months of the year, which has resulted in a much stronger first quarter than 2023. However, mixed inflation and economic data in the first few months, combined with the decision to call a general election, led many investors to pause decision-making in the second quarter to wait to see whether a clearer picture emerges.
“While this uncertainty has slowed trading, particularly in recent weeks, deal activity and interest remain at relatively healthy levels. While the headline figures for the past six months don't necessarily paint the best picture, we feel the reality is a bit more positive.”
“The diversification of different investor types over the past six months is also noteworthy. Over the past decade, international buyers have accounted for the majority of investment in Scotland, but so far this year the mix has become much more evenly split, with institutional buying and selling, and increased interest from private equity and property companies. The growing depth of the buyer pool should bode well for the remainder of 2024.”