The industrial sector in Scotland is significantly out-performing retail and offices, according to the latest Scotland Property Quarterly report from leading property consultant CBRE.
With a total return of 3.5% in Q2 and 17.8% in the twelve months to the end of June, industrials benefited from significantly higher capital growth at 10.2% per annum, nearly double the rate of offices, the next fastest growth sector.
Overall quarterly returns for Scottish commercial real estate as a whole improved slightly in the second quarter of 2015, with the Scottish All Property Total Return sitting at 2.4%, an increase of 0.2% over Q1. However, these rates remain lower than this time last year, when a return of 3.2% was posted in Q2 2014.
As a result, overall annual returns to the end of June 2015 have drifted lower and sit at 11%, which is down from 11.8% at the end of Q1.
The office sector is now showing the most varied results across the country. While the Edinburgh office sector is by far the best performing in Scotland, with an annual total return of 17.1%. Glasgow offices hover just above the all property average at 11.8%. The Aberdeen office sector is now the weakest overall performer, attributable to the ongoing issues within the oil and gas sector.
Despite a slight improvement on the Q1 return, retail continues to be the weakest performer of the three main sectors in Scotland with a quarterly total return of 1.9% compared to 1.6% in Q1. However, Aberdeen retail appears more resilient with higher rates of return than offices or industrials: 12.7% over the past twelve months.
Campbell Docherty, senior director at CBRE National Capital Markets, said: “With Scottish industrials showing capital growth at double the rate of Scottish offices, this sector continues to show strong performance in the twelve months to the end of June. Q2 saw rental growth re-emerging in all sectors, again led by industrials showing 3.1% to the end of June.
“Returns in the retail and office sectors both showed improvement. At a city level, Aberdeen led the way in retail and Edinburgh offices stand out as the best overall performer these last twelve months with a total return of 17.1%.
“Investment volumes at £737m are somewhat lower than expected however we forecast improved transaction levels in the second half of 2015 with a number of £50m value plus assets known to be hitting the market.”