Why ‘change is in the air’ for Scotland’s commercial property market
“We are seeing more solidity in pricing and even some hardening but very specifically focused at the very prime end of sectors” – Chris Thornton, Lismore
Scotland’s commercial property sector is seeing “signs of stability” with a recent flurry of activity at the upper end of the market.
Highlighting a string of key deals that competed over the summer, Lismore Real Estate Advisors said “change is in the air” with more solidity in pricing.
In its latest update, the property advisory firm described the third quarter as “positive” with transaction volumes totalling £426 million, up 7 per cent compared with a year earlier and 16 per cent above the five-year average. That resulted in the highest Q3 total in five years.
Property experts said they had witnessed significant deals in the office and logistics sectors, giving investors’ confidence that, “for the right product, pricing in the prime sector is finding its level”.
Key transactions included Pontegadea’s £42.5 million acquisition of The Mint Building, a prime office in Edinburgh, from Hines HECF Sarl. In Glasgow, Aviva acquired a direct-let student accommodation development at Gilbert Street from PVP Developments for £23m , while the largest deal of the quarter was Iroko Zen’s £50.4m purchase of 122 Waterloo Street from KFIM. That building is let to Morgan Stanley.
The sale of Belgrave Logistics Park in Bellshill was also concluded during the quarter. The park was speculatively developed by Knight Property Group, with tenants Wincanton, Likewise Group, RES & Bunzl.
Lismore associate Chris Thornton said: “Change is in the air and we have not seen this sort of pricing in the market for several years and while it is very much focused at the prime end of the market, off reversionary rents with strong ESG credentials, it does feel like a watershed moment.
“We are seeing more solidity in pricing and even some hardening but very specifically focused at the very prime end of sectors. Recent high-profile sales have established stronger pricing for Edinburgh offices, Central Belt logistics, and long-leased PBSA [purpose-built student accommodation] has found a new stronger level.
“We are also witnessing corporate M&A activity increasing, which is motivating sellers as portfolios are reshaped, to align with their sector-specific and wider strategic goals,” he added.
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