Commercial property in Aberdeen will attract more investor activity during 2022, a market review has predicted.
Property advisory firm Lismore Real Estate Advisors said investors may start to revisit the Granite City market this year.
It added: “Good levels of interest for quality assets in the retail warehousing and industrial sectors will continue.
“With the oil price looking more stable, the occupational market is showing early signs of improvement and we anticipate opportunistic buyers being tempted by the right building, with quality tenants and the right price.”
New figures from Lismore show investment in Scottish commercial property jumped by 24% in volume terms during 2021.
The total value of deals struck north of the border rose by around £300,000 to £ 1.345 billion, the firm said in its latest quarterly review.
This was despite ups and downs faced amid the Covid-19 pandemic that year, it added.
“Investors continue to grapple with offices, other than those of the very best quality or which can be adapted to meet more challenging ESG credentials.”
Chris Macfarlane, Lismore Real Estate Advisors.
The emergence of the Omicron variant and the return of restrictions continue to bring challenges across the entire property market and global economy.
But Lismore said quarter four trading “remained strong”, with volumes up 27% year-on-year, and worth a total of £520m.
The figures came as Edinburgh-based Lismore revealed its top six Scottish investment market predictions for 2022, based on research.
It predicted the top three performing sectors in 2022 will be retail warehousing, distribution and multi-let industrials.
Support for food stores has “fallen significantly”, Lismore said.
Offices struggle to attract interest
The office sector was the most poorly backed by survey respondents, with concerns over capital expenditure (capex) requirements and future working habits mentioned cited as headwinds.
On the Q4 performance, Lismore director Chris Macfarlane said: “The wall of overseas capital chasing stock continued, and pricing reached pre-pandemic levels in the food stores, logistics and retail warehousing sectors.
“However, there are challenges remaining for significant parts of in-town retail/leisure.
“Investors continue to grapple with offices, other than those of the very best quality or which can be adapted to meet more challenging ESG (environmental, social, and governance) credentials.
The strongest, well-located assets have seen occupancy levels recover.”
“When looking at themes, one part of the market which was hit hard initially but which has rebounded – in part – very strongly is the alternatives sector, covering PBSA (purpose-built student accommodation), management contract hotels and serviced apartments.
“The strongest, well-located assets have seen occupancy levels recover and while net operating income might not be quite back, investor interest has been stirred by their resilient qualities.”
Mr Macfarlane added: “UK institutional activity remains very focused on longer income defensive stock including retail warehousing and distribution.
“Overseas investors continue to target Scotland, Edinburgh in particular, with buyers from the Middle East and mainland Europe all remaining active.
“But the overwhelming weight of capital has been from North America.
“The level of distressed selling continues to be very limited, with the more opportunistic buyers looking further up the risk curve, either direct development, vacant buildings or shopping centres.”
Lismore’s top six Scottish investment market predictions for 2022
- A trend for “off-market” acquisitions will continue – Lismore says buyers are prepared to pay “premium pricing” for the best stock to avoid competition.
- A greater weight of overseas capital will invest in a Scottish market described as “an attractive and safe destination”.
- The current gap between prime office yields and the rest of the market will widen as occupiers and investors become “ever more exacting” in their ESG requirements. Top-tier buildings meeting the highest standards will command premium pricing, while mid-tier offices requiring significant capex “will also present opportunities”.
- Glasgow will overtake Edinburgh in office investment volumes.
- Aberdeen will see improved investor activity.
- The leisure market will be “one of the most interesting” during 2022 – the best city centre bars and restaurants are “likely to see a strong bounce-back”, while out-of-town markets, roadside and drive-thru operators “continue to thrive”.