Aberdeen could see a “resurgence” of commercial property investment and be one of the winners of the Scottish market over the next six months.
That is the view of Lismore Real Estate Advisors, whose latest Scottish investment market quarterly review says there was a pre-summer flurry of activity across the country during the three months to June despite growing headwinds.
The second quarter continued the momentum of a strong start to the year, with transactional trading worth about £612 million, up some 104% on Q2 2021, the report says.
Q2 2022 activity was 56% above the five-year average. Excluding 2020, when deals were affected by the pandemic, the Q2 2022 performance was 27% above the average.
‘The Granite City may well begin turning heads’
Launching the report, Lismore director Colin Finlayson said: “Cash remains king.
“The increasing cost of capital for debt-backed investors is creating an advantage to cash investors – if they can move quickly, then opportunities will arise in the second half of the year.
“Aberdeen could see resurgence and be one of the winners over the next six months, with investors seeking out higher yielding stock to balance their portfolios. The Granite City may well begin turning heads.”
Caution in the Scottish market overall is driven by the war in Ukraine, rising inflation and more challenging debt conditions, causing investors to “pause for breath”, Mr Finlayson added.
Pricing in the market is likely to come under pressure “cross sector” on assets which are not “absolutely prime”, particularly if they do not meet environmental, social and governance (ESG) credentials, Lismore says.
The report adds: “This is further driven by increased cost of capital and more cautious decision-making.
“UK pension funds and investment managers continue to seek secure long income defensive stock, particularly in the logistics and PBSA (purpose-built student accommodation) sectors.
“There remains a significant weight of capital from overseas investors, particularly from North America, the Middle East and Europe.
“UK based property companies continue to be acquisitive in the retail warehousing and industrial sectors, targeting the best locations with strong occupational dynamics where they can achieve optimum pricing/value.”
Conversation