Investment in commercial property in Scotland fell 11% to £2.12billion last year, hampered by a quiet fourth quarter, a new report says.
Only 17 deals were completed in Scotland in the last three months of 2015, down from 36 a year earlier, according to property consultancy Lambert Smith Hampton (LSH).
By contrast, the UK’s overall performance was bolstered by a strong end to 2015, with investments hitting £15.7billion, up 23% year-on-year.
For the full year, investment in the UK went up 4% to £64.3billion, a new annual record, LSH said in its latest UK Investment Transactions report.
Investment in “alternative assets” – such as hotels, student accommodation and healthcare – jumped 53% to £14.8billion in 2015, significantly bulking up the UK total.
Overseas investors also played a big part in helping the UK achieve its record, accounting for a 50% share of total volume.
North America was the dominant buyer, making up 46% of overseas investment.
Ewen White, director of capital markets at LSH in Glasgow, said the aftermath of the referendum had stifled the Scottish market.
However, he was encouraged by the number of new entrants coming north of the border to buy stock at cheaper prices than in England.
One of the key deals in the north of Scotland last year was the £116million purchase of Inverness’s Eastgate Shopping Centre by the Harbert European Real Estate Fund and Scoop, a London-based shopping centre asset manager and developer.
The two organisations teamed up to buy Eastgate – the biggest shopping mall in the Highlands – from BMO Real Estate Partners in August.
LSH chief executive Ezra Nahome said 2015 had been a “stellar” year for UK commercial property investment and expects 2016 to remain positive.
Mr Nahome said: “We expect returns to reach 9% in 2016, down from 13% in 2015 but still well above the historic average.
“With rental income returning as the main driver of performance, pro-active asset management initiatives, such as investment of capex into office refurbishments in areas with few vacancies, are likely to offer the best prospects for investors.
“If anything, political developments arguably pose the greatest risks to the market. A period of uncertainty in the run-up to the UK’s referendum on the EU, coupled with a sense that some of the value has gone from the market, may weigh down investment activity.
“However, while 2015’s record annual volume is unlikely to be repeated this year, we should see activity to remain well above the recent average.”
