Growth in overseas investment in Scottish commercial property continues

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Edinburgh Quay

A number of new international investors could emerge in Scotland over the next 12 months, particularly among private overseas buyers, according to Knight Frank.

The independent real estate company said that new sources of money were likely to appear in 2017, with interest already coming in from countries such as South Africa and China. According to 2016’s investment figures, over two-thirds of investment in Scottish commercial property came from overseas – a significant proportion of which is likely to have been from ultra-high-net-worth individuals.

Numbers produced by Knight Frank as part of its annual Wealth Report, showed that £1.17 billion of the £1.78 billion spent on Scottish commercial property, including offices, hotels, retail outlets, student accommodation, and industrial units, was international money. The figure was the highest for more than a decade, eclipsing the average of 30.17% recorded by overseas investors in the past ten years.

Edinburgh proved particularly popular with overseas investors – £966 million of the £1.19 billion spent in the city came from international sources; equivalent to 81.14%. Meanwhile, investment from abroad made up about a third of spending in Glasgow, 32.92%.

The report from Knight Frank also found that commercial real estate remains an important asset class for private investors, with 27% of global transaction volumes attributed to private buyers in 2016. Its survey findings showed that a quarter of private client wealth is held in real estate investments, with the UK proving the most popular individual country in Europe as a destination for investment.

Alasdair Steele, Head of Scotland Commercial at Knight Frank, said: “Scotland is very much on overseas investors’ radars, particularly private buyers. We’ve had enquiries coming in from all over the world, which could mean a number of new entrants in the coming 12 months, provided the right type of property comes up for sale.

“Edinburgh continues to emerge as a hub of investment activity. Often investors will have visited the city, know what it has to offer, and can see its intrinsic value. Its position as a capital helps it stand out from the other key regional centres in the UK and, compared to other European cities, Edinburgh has more landlord-friendly lease terms, relatively attractive pricing, and strong occupier fundamentals. It stands out for all the right reasons.

“Over the past year we’ve also seen overseas buyers investing in less prime locations and buying properties with shorter lease terms. This trend seems likely to continue as overseas and private buyers seek a more generous income return, which is difficult to come by in such low economic growth and interest rate environments.”