The Scotsman

Indyref was investment watershed

Scotland’s commercial property market has attracted notably more overseas interest in the decade following the 2014 independen­ce referendum than it did in the ten years prior to the vote, new research suggests.

The analysis shows that in the build-up to the referendum on September 18, 2014, UK institutio­nal investors accounted for the largest share of investment in Scottish commercial property at 36 per cent.

However, during the ten years that have followed, internatio­nal investors averaged nearly half of investment volumes at 48 per cent – rising from just 31 per cent between 2004 and 2013, and well ahead of UK institutio­ns’ annual average of 26 per cent. The study by property consultanc­y Knight Frank is based on its analysis of Real Capital Analytics (RCA) data.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “A lot has changed in the ten years since the independen­ce referendum – both directly and indirectly related to the vote being held. Understand­ably, in the immediate build up to and aftermath of the referendum, UK institutio­ns paused investment in Scottish commercial property. that created an opportunit­y for internatio­nal investors to fill the gap and, with the exception of this year, they have been the largest buyers since 2015.”

So far in 2024, in a reversal of the post-referendum trend, internatio­nal investors have accounted for just 25 percent of investment volumes, while real estate investment trusts( re its) and private buyers have represente­d 31 per cent each.

Steele said consumer trends had changed“a great deal” since 2014 which is reflected in retail property investment. In 2004, the sector accounted for 59 per cent of total investment volumes,which fell to a low of 17 per cent in 2021, amid the pandemic.

However, retail has re bounded from thatnadir and the arrival of the £1 billion st james quarter in Edinburgh and the recent sale of Union Square in Aberdeen demonstrat­e that there are opportunit­ies emerging in the sector again, he noted. A stake in St James Quarter that was put up for sale this summer is said to be attracting“a good level of interest”.

Average annual investment volumes have remained pretty consistent, according to the study, at £2.45bn pre-referendum and £2.48bn in the decade that followed. Both ten-year periods included major events that affected markets, including the global financial crisis, Brexit and the Covid-19 pandemic. Meanwhile, investment in hotels has risen from 11 percent to 16 percent, as Scotland grow sin popularity as a tourist destinatio­n.

Steele added: “The marked difference between this year and the trends that emerged post-referendum also show that things are changing all the time. Private purchasers, typicallyf­amily offices or ultra-high net-worth individual­s buying with cash, have re-emerged as one of the key drivers of deals, as debt-financed investors have been subdued by higher interest rates.”