Commercial real estate investment plunges over summer, but better times may come
Investment in Scottish commercial property plunged in the third quarter amid economic uncertainty, although sentiment is expected to improve at the start of the new year.
Publishing its latest Scotland snapshot, property adviser Colliers pointed to a “significant slowdown” over the summer months, with just £200m trading between the start of July and the end of September. He noted that in the half Scottish investment volumes reached £1.5bn, with the £200m traded in the third quarter bringing the total to £1.7bn for the period to at the end of the third trimester. However, this is around 15% more than the corresponding 2021 figure.
Cross-border capital accounted for half of all activity by value in the nine-month period, which is above the 2021 average of 42%. PonteGadea Immobiliaria, Heimstaden Bostad and Ares Management were the top overseas buyers. most acquired in value so far this year.
Elliot Cassels, head of the national capital markets team at Colliers Scotland, said: “Investor sentiment cooled at the start of the summer, affecting prices. The fall in sentiment and prices was much more pronounced after the “mini-budget” when gilt and debt rates rose significantly. While some investors have pulled out of the deals, there are still a few in the process of being renegotiated.
“There is no doubt that prices have changed, but we have seen little evidence being created. We expect sentiment to improve and more trades to take place when there is more certainty in the debt market.
The retail sector saw a total of £70 million invested in the third quarter, with the acquisition of Glasgow’s West End Retail Park and Cumbernauld Retail Park for £34.5 million and 24 million respectively. £5 million. The industrials sector had a quiet quarter with just over £20m traded across three deals.
Oliver Kolodseike, Research Director at Colliers, said: “Scotland is not immune to the wider economic challenges sweeping the UK and as such we see the property market Scottish commercial amid new pricing. By the end of the year, we expect to see significant outward movements in yields across the board, especially given the low volumes traded in the third quarter.