SCOTTISH commercial property has had its best first half of the year for investment volumes since 2018 as the market continued its recovery from the Covid-19 pandemic, according to new analysis.

Knight Frank, the independent commercial property consultancy, found that £1.2 billion of commercial property deals were agreed between January and June 2022, up 54% on the same period last year.

The figure is also 21% ahead of the five-year average – albeit, this was skewed by low investment volumes during 2020 and, to a lesser degree, 2021.

Overseas investors represented more than two-thirds (68%) of the total investment figure, equivalent to £843 million, with UK property companies the second most active buyers totalling £296 million – 23.9% of overall investment volumes.

Investment in retail assets increased by more than 55% on 2021, rising from £148 million to £230 million with retail warehousing accounting for £165 million of the total figure.

Scottish commercial property investment best since 2018Source: Knight Frank

Offices were the most popular asset class with £410 million-worth of deals, boosted by the sale of HFD Group’s 177 Bothwell Street in Glasgow, in what is believed to be a record transaction for Scotland.

Edinburgh saw £400 million of investment, while Glasgow accounted for another £329 million. Deal activity in Aberdeen continued to pick up, reaching £189 million, largely from the sale of two retail warehousing assets.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of the year has underlined a couple of key trends that have emerged over the last two years: retail warehousing and industrials remain in high demand, while prime offices are highly sought after – underlined by the deal for 177 Bothwell Street."

Scottish commercial property investment best since 2018Source: Knight Frank

He also said: "Similarly, overseas investors accounting for such a high share of investment during the last six months also highlights the strength and depth of the buyer pool for Scottish commercial property. 

“An uncertain macro-economic outlook will likely cool deal activity over the next couple of months. However, commercial property has typically acted as a hedge against inflation for investors and, with yields in Scotland’s main cities comparatively good value and supported by strong occupier markets, we expect interest to remain strong in the second half of the year.”

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IT has been a good month for getting out to visit companies – a combination of less scheduled meetings and events for me alongside a reality that very few of our manufacturers now take formal holiday shutdowns makes this a great opportunity to see and hear what their successes and challenges are.

Reasons to be cheerful continue to be orders and demand, backlog and order books generally across the board giving comfort that current and future costs will be absorbed, and so long as we are all realistic on those costs – focusing on the things we can control, not those we cannot - profitability and a welcome commercial sustainability can be achieved.

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Scottish commercial property investment best since 2018