GVA’s Stuart Agnew says investor confidence in commercial property in Scotland has been impressive so far this year despite ongoing political uncertainty.

Over the past five years we have lived in times of near constant political turmoil and uncertainty.

That’s usually bad news for investment intentions in the commercial property world as with uncertainty comes risk, and it is naturally therefore easier to play a safe hand rather than take a brave decision and be in the minority in such circumstances.

However, Scotland’s investment market has shown signs of strength in the first quarter of 2017 with a deeper depth of investor interest compared to 2016. This has come despite constitutional wrangling being front and centre of the political agenda again this year.

In fact, we’ve seen several investments that did not sell in 2016 going under offer or completing in the last three months. Examples of this include The Tun and Orchard Brae House in Edinburgh, as well as 7 West Nile Street, Glasgow and the recent Redevco purchase of the Nike store on Buchanan Street for c £29 million.

These recent deals indicate to me that the big political debates swirling at Scottish, UK and European levels are unlikely to cause a meaningful change in the property markets in Scotland in the short to medium term. GVA were involved in the sale of the Hovis Distribution unit at Eurocentral earlier this year, which sold for a yield of 7% when it had originally been under offer at a lower price at the end of last year. There is still a degree of confidence about investing in Scotland.

There have also been other major commitments to Scottish real estate which provide a degree of confidence looking forward. These include the investment by the Dutch pension Fund, APG, into the St James Centre in Edinburgh (c £400m), the purchase of the Kingsgate Shopping Centre by Orion for c £90m and the TH Real Estate purchase of the Omni Leisure scheme in Edinburgh for c £75m.

There are a few factors that are undoubtedly helping to sustain prices in the marketplace. These include the scarcity of good quality sensibly priced stock and a positive underlying occupational story in the industrial, retail and office markets. Indeed, whenever new investment opportunities become available they attract strong initial interest.

Also, given that no-one has a clear idea what the outcome will be of the major constitutional debates currently being played out a case could be made that investing in Scotland is viewed as a risk diversifier. As questions remain about passport rights and regulations around the UK’s terms when exiting the EU, investors may view Scotland as an opportunity to spread the risk of any poor Brexit deal, regardless of the spectre of independence and its possible consequences. If businesses still require a base within the EU post-Brexit, then why not Scotland as opposed to mainland Europe?

At present, concerns remain about the economic effect and currency implications of continued political uncertainty. However, the nervousness about the independence issue is, we believe, starting to lessen and indeed part of the reason that some UK Funds are not investing is down to quite significant buying activity in 2014 and 2015. UK funds and both international and high-net worth investors who know the marketplace have confirmed that they wish to be active in Scotland in 2017 and beyond.

The bottom line is that investing in commercial property in Scotland is and will remain attractive for both UK and international investors, and I don’t anticipate this will change in the medium term.