ABERDEEN has retained its lead over Glasgow and Edinburgh as returns from investment in commercial property in Scotland continued to improve in the fourth quarter of last year.

Total returns rose to 3.3% over the period, compared with 2.3% the quarter before, the latest Scotland Property Quarterly report from CBRE has found.

The improving performance means total returns came in at 7.3% for 2013, well ahead of the 1% recorded in 2012, with the quarter four showing the strongest since the first quarter of 2010.

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The report suggests the findings indicate the economic recovery has "firmer foundations and is more sustainable". However it notes that while the commercial property sector in Scotland has started to close the gap on the UK as a whole, "Scottish property continues to underperform".

The UK commercial property sector produced total returns of more than 10% in the year to the end of December, CBRE said.

Aileen Knox, senior director at CBRE (Scotland), also cautioned that, in spite of positive growth in estimated retail values (ERV) across the retail, office and industrial sectors, the growth was "still limited to specific locations and for those properties which are considered to be at the prime end of the market".

Ms Knox noted 2013 had seen a notable increase in the volume of commercial property transactions, with the £1.78 billion booked "a significant increase on 2012 and higher than any year since 2007".

Nearly half of the transactions by value took place in the fourth quarter, which saw significant rises in office and retail deals.

Retail saw the largest volume increase at £742 million, compared with £233m the year before. The sales of Aberdeen's Bon Accord and St Nicholas Shopping Centres and Glasgow's St Enoch Centre accounted for about half of the total.

On a city-by-city basis, the commercial property sector in Aberdeen continued to outperform Glasgow and Edinburgh. Its lead was most marked in the industrial and office sectors, where it produced annual total returns of 16.7% and 15.5% respectively.

The report said the findings chimed with the long-standing trend for stronger returns in the city, driven by strong occupier demand, low levels of supply and the high price of oil.

However, it suggested that Edinburgh and Glasgow were beginning to catch up. Edinburgh offices recorded annual total return of 11.6%, while the industrial sector in Scotland's two biggest cities delivered yearly returns of 8.4%. It means Glasgow and Edinburgh were the only two other cities to outperform the all-property Scottish total return.

Ms Knox said: "The survey data included in our Q4 report is generally positive, with favourable improvements in the Bank of Scotland's PMI (purchasing managers' index) indicators between December 2013 and January 2014, levels of unemployment continuing to fall and GDP data available for Q3 showing that Scottish GDP grew by 0.7%.

"However, whilst retail sales for the UK fared well last year, the retail sales data for Scotland has been more disappointing with like-for-like sales falling over the 12-month period between December 2012 and December 2013."