Lismore: Positive outlook for Scottish commercial property as deals top £430m

Lismore: Positive outlook for Scottish commercial property as deals top £430m

Edinburgh's OMNi Centre

Indicating a positive start to the year for Scotland’s commercial property market, Q1 2024 transaction volumes grew 33% year-on-year to £431 million.

According to the latest figures published by property advisory firm Lismore Real Estate Advisors, pricing is showing signs of stabilisation, with some sectors experiencing upward pressure. Logistics and multi-let sheds remain strong, with prime yields expected to slightly harden.

Notable transactions in Q1 include Lone Star’s acquisition of Union Square in Aberdeen for £111m, DS Properties’ purchase of BP’s North Sea HQ for £16m, ICG’s acquisition of Tesco in Corstorphine for £43.9m, and an overseas private family office’s acquisition of Omni in Edinburgh for £64m.

Lismore: Positive outlook for Scottish commercial property as deals top £430m

Chris Thornton

Lismore associate Chris Thornton said: “Key themes are emerging in various sectors, with logistics and multi-let sheds continuing to lead the way, with strong demand and limited supply driving genuine rental growth and underwriting investment rationale.

“There are early signs of an increase in fund activity focusing on the prime retail, retail warehousing, hotel, and industrial sectors. Corporate mergers and acquisitions are increasing, leading to motivated sellers and portfolio realignments.

“Notably, Aberdeen is experiencing improved liquidity, with a significant uptick in office and industrial volumes attracting yield-hungry buyers.

“Strong rental growth forecasts are driving interest from private investors in the drive thru’s sector, while private equity firms are starting to sense some real value leading to a number of high-profile acquisitions.”

He continued: “In the office market, if you can buy prime buildings at 7.5%+ then there are signs of increased depth and if debt can be obtained at a sensible level, hitting double digit geared returns is achievable.

“Retail warehousing offers good value with prime yields at 6.50%-7.00%. The living sector remains attractive and despite slow development, investor appetite remains strong.

“Buyer activity increases, with funds expected to be net sellers but acquisition activity rising for the first time in 2 years, focused on “sheds and beds” but with high street retail and retail warehousing attracting attention. Private equity is seizing opportunities, such as Lone Star’s acquisition of Union Square in Aberdeen.

“Overall, Scotland’s commercial property market shows resilience and recovery, offering various investment opportunities across sectors.”

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