Investment in Edinburgh’s commercial property market is on course to reach its highest point since 2006, according to analysis from Knight Frank.
The independent real estate firm said that £336 million worth of offices had been bought in the city in H1 2016, with a further £140 million likely to be spent by investors in Q3 2016.
The total, £476 million, will be the highest in a decade – when £627 million was invested in the city during 2006. The £336 million spent in the first half of the year also already surpasses 2015’s overall figure of £331 million.
Alasdair Steele, Head of Scotland Commercial at Knight Frank, said: “This is an exciting time for Edinburgh, despite political uncertainty. A record rent of £33 per sq. ft. was achieved at Atria in the city centre earlier this year and we’d expect further rental growth to follow, as we approach the end of the year.
“If you look back to 2006, when we last saw this level of investment, only four European cities had keener yields than Edinburgh. That’s now 14, which underlines the discount it offers, not only compared to other regional UK centres, but across the continent.
“With high demand, lack of supply and a weak pound, Edinburgh is a compelling story for investors – particularly from overseas. International money has driven market activity over the past 18 months and we’d expect it to characterise the year ahead too.”
In September, Knight Frank concluded three transactions in the capital, for a combined £22 million. Among the properties were Musselburgh’s Eskmills and Shandwick House (67-83 Shandwick Place), which Knight Frank said demonstrated the appetite for different types of property in the city and its environs, despite Brexit uncertainty.
Office take-up for H1 2016 in Edinburgh was 15% above the long-term average for the period, with 352,500 sq. ft. let. Technology, Media and Telecommunications (TMT) companies accounted for more than a third of activity, 34%, while availability stood at its lowest level since 2012.
Toby Withall, Office Agency Partner at Knight Frank in Edinburgh, added: “Edinburgh’s fundamentals remain strong. Grade A office space in the city centre is at a premium and the lack of new stock coming through is pushing up rents – given the capital’s historic nature, this trend is only likely to continue.
“There are a healthy number of requirements being circulated and competition for the best space will be fierce. Any businesses looking to move will have to think carefully about the type of accommodation they require and may even need to look beyond the city centre. West Edinburgh has been the traditional pressure release valve, but other options are being brought forward – such as the International Business Gateway at New Ingliston.”