Hotspots and not-spots revealed as Scottish property investment tops £1.5 billion

Property consultancy Knight Frank said its analysis of Real Capital Analytics (RCA) data found that £1.46bn worth of investment deals were concluded in the first nine months of the year. While that was down by about a fifth on the £1.85bn recorded during the same period last year, it was in line with the £1.45bn average for Scotland during the period from 2020 to 2024.

Retail has been the most active investment asset class so far in 2025, representing £452 million-worth of deals. The industrial property sector had its second best third quarter since the pandemic, behind only 2024, with £153m of transactions, boosting its year-to-date performance to £251m.

Offices and hotels saw £306m and £305m of investment, respectively, according to the latest data.

International investors accounted for 45.9 per cent of investment in the third quarter of 2025 - up from 39.6 per cent in the first half of 2025 and on track to be their highest share since 2022. Private investors continued to represent a significant portion of the market, at 27.7 per cent, while institutions and real estate investment trusts (REITs) and listed property companies accounted for 13.3 per cent and 11.3 per cent, respectively.

Previous research from Knight Frank on deal activity during the first half of 2025 showed that the average deal value in Scotland rose 24 per cent compared to the previous five years - and was as much as 84 per cent higher in Edinburgh - as investors sought out quality assets in a challenging market.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “At the beginning of 2025, there was a sense of optimism about the state of the economy and a sense that interest rates would be cut significantly by this stage in the year. But after an eventful first half eased over the summer, there is a reality check in the market and a growing realisation that there will be no quick fix to the challenges that were putting a brake on investment decisions.

“As a result, more investors are coming to the conclusion that they have to press ahead with their plans, which has helped activity levels. At the same time, the deep buyer pool for Scottish commercial property has provided support in what is in many ways a challenging market.

“Fewer deals are happening, but the assets that are trading hands tend to be higher quality buildings in prime locations and are attracting a good deal of interest,” he added.

“From a sector perspective, the fairly even spread reflects the strength and depth of the stock available across different areas of the economy. Industrials have surged once again after the yield compression of recent years led to a slowdown in that market. Hotels remain popular - particularly in Edinburgh - while retail’s continuing transformation creates opportunities and offices are relatively consistent.”

He predicted a “flurry of activity” as the year draws to a close, but warned of possible fallout from November’s Budget.