Investment into Scottish commercial property in 2017 reached £2.3 billion, 37% ahead of the 10 year annual average (£1.7bn) according to international real estate advisor Savills.

The firm said that total transaction volume was boosted by 36 deals worth £20 million+, over double the 14 deals of this size recorded in 2016.

Unlike 2016, Savills explains, which saw £1.9bn invested in Scotland’s commercial property sector – dominated by forward funding of Edinburgh St James – in 2017, investment was spread across offices, industrial, retail and leisure. Savills notes a healthy mix of activity across Scotland too, with £867m invested in Glasgow (38% of activity), £794m in Edinburgh (35%), £174m in Aberdeen (8%) and £461m (20%) invested elsewhere in Scotland outside of the three cities.

The overseas market accounts for 34% (£787m) of total investment volumes, representing the largest investor type while 2017 also saw a return of property companies across Scotland, who accounted for 30% (£688m) of the total invested.

Strong levels of demand saw office yields continue their inward movement throughout 2017. Savills reports prime yields in Aberdeen ended 2017 at 6.25%, 100 basis points below the start of 2017. Prime yields in Edinburgh and Glasgow both moved in 25 basis points over the course of 2017 to 5.25% and 5.5% respectively. Yet Savills points out Scottish prime office yields remain attractive compared to the UK regional prime office yield, which currently stands at 4.75%.

Nick Penny, head of Scotland at Savills and director in the investment team, said: “Investment in 2017 can be defined by the spread of transactional activity both in terms of sector and geography, where previously prime offices in Edinburgh had dominated. We have seen some significant deals done on trophy assets and pricing has continued to move in across the board.

“Whether some landlords sitting on stock will choose to sell in 2018 in light of the strong pricing being achieved remains to be seen and one of the main challenges for the year ahead could be a lack of product. If limited sale opportunities come to the market pricing may harden even further to return to 2007 pricing levels. However unlike 2007, the challenge vendors face today is over where they put their money as property yields continue to perform better than other asset classes.”

Key deals include the £68m acquisition of Edinburgh’s Saltire Court by Al Rashed; Knight Frank Investment Management buying 122 Waterloo Street in Glasgow for £66m; L&G opting to forward fund New Waverley in Edinburgh for £106m; and Frasers Centrepoint’s £137m acquisition of Hillington Park, Glasgow.