Alasdair Steele

The independent global property consultancy’s research found that £1.2 billion has been invested in Scottish commercial property in the first three quarters of 2021, up one-fifth (20.78%) on the equivalent period last year. Investors spent nearly £1.7bn during the same nine months in 2019.

Overseas investors remained the most active buyers of commercial real estate in Scotland, accounting for just over £500 million – or 41.81% – of overall volumes. Private property companies represented another £322m, equivalent to just over one-quarter (26.77%) of total investment.

Industrial property and retail warehousing have been the stand-out investment performers in 2021, with volumes outpacing the equivalent periods in both 2019 and 2020.

The industrial sector has attracted £259m of investment in the last nine months, more than double 2019’s £109m and 2020’s £112m. Meanwhile, retail warehousing accounted for £232m in the first three quarters of 2021, compared to £213m and £117m in 2019 and 2020.

Offices saw £293m worth of deals in the nine months to the end of September 2021, up on £240m during the same period last year, but still below £575m in 2019. Investment volumes in leisure property – such as restaurants and cafes – was just £27m, marginally up on the £20m registered last year, but significantly down on 2019’s £135m.

Knight Frank said that with a number of deals already lined up for the final quarter of 2021 and investors sitting on a substantial amount of cash, there could be a flurry of activity before the end of the year.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Our figures suggest that Scotland is edging closer towards the level of activity we saw prior to the Covid-19 pandemic. While there is still some way to go, the economy was locked down for much of the first half of the year and there has been a noticeable upturn in investor sentiment since the start of the summer.

“Industrials and retail warehousing have seen the clearest upturn in activity, with investment volumes more or less doubling in both markets. Prime offices remain in high demand and, although investment volumes in offices are still some way off where they were in 2019, we expect to see more activity in this sector towards the end of the year and into 2022.

“There is a weight of money looking to be invested and good quality stock coming onto the market. We expect that to drive deal activity in the final quarter of the year and, with that, we could begin to see prime yields fall – as has already been the case with some recent deals in Edinburgh.”