Investment into Scottish commercial property fell in the first half of 2024 as uncertainty around interest rates caused investors to pause their consideration in the second quarter.
This comes after analysis of RCA data by commercial property consultancy Knight Frank, which found that around £750 million was invested in commercial property in Scotland between January and June 2024.
This is down 19% from the same period last year, when it was £922 million, and 22% below the five-year average of £954 million, but more than double 2020's figure of £447 million.
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.
The most active buyers were real estate investment trusts (REITs) and publicly listed real estate companies, which accounted for 32% of investments, followed by international investors at 30% and private capital at 20%.
Knight Frank said that despite an overall decline in investment volumes, it has seen a recent upswing in investment activity, with its capital markets team recently completing a series of transactions totalling well over £100 million.
These included the sale of 40 Torfitchen Street, Edinburgh, the acquisition of 1 West Regent Street, Glasgow and a large multi-storey car park deal.
Total investment in Scottish commercial property, H1 2020 to 2024 (Image: Knight Frank)
Alasdair Steele, head of Scottish commercial at Knight Frank, said: “The start of 2024 is expected to see at least one interest rate cut in the first half of the year, resulting in a much stronger first quarter than 2023.”
“However, mixed inflation and economic data in the first few months, coupled with a general election, led many investors to pause decision-making in the second quarter to wait to see if a clearer picture emerged.
“While this uncertainty has slowed trading, activity and interest remain at relatively healthy levels, particularly in recent weeks.”
“While the headline figures for the past six months don't necessarily paint the best picture, the reality feels a bit more positive.”
Steele added: “The diversification of different types of investors over the past six months is also noteworthy.”
“Over the past decade, overseas buyers have made up the majority of investment in Scotland, but since the start of this year the mix has become much more even, with institutional buying and selling, and growing interest from private equity and property companies.”
“The expanding buyer base should bode well for the remainder of 2024.”
Don't miss out on the latest news with our twice-daily newsletter – sign up for free here.