By Scott Wright

INVESTMENT in Scottish commercial property slowed sharply in the third quarter as economic conditions deteriorated, new figures have shown.

While deals worth £1.5 billion had been concluded by the half-year mark, just £200m worth of transactions were completed in the subsequent three months, property firm Colliers has found. The agent said market sentiment in Scotland began to cool in summer and worsened in the aftermath of former Prime Minister Liz Truss’s mini-budget in September, which sparked chaos on the financial markets.

“Scotland isn’t immune to the wider economic challenges that are sweeping the UK and as such, we are seeing the Scottish commercial property market find itself in the middle of a re-pricing,” said Oliver Kolodseike, research director at Colliers. “By the end of the year, we expect to see significant outward shifts in yields across the board, particularly if the low volumes traded in Q3 are anything to go by.”

Colliers found that £1.7bn of commercial property deals had been concluded in Scotland by the end of the third quarter, around 15 per cent higher than the corresponding figure for 2021. Cross-border activity has accounted for around half of the deals by value in the year to date, higher than the 2021 average of 42%.

PonteGadea Inmobiliaria, Heimstaden Bostad, and Ares Management have been the most acquisitive overseas buyers.

Spanish real estate firm PonteGadea Inmobiliaria acquired 177 Bothwell Street in Glasgow, Heimstaden bought the Platform Bonnington build-to-rent scheme in Edinburgh for £124m, and Ares Management snapped up Westway Industrial Park in Renfrew for £111m.

Elliot Cassels, director in the national capital markets team at Colliers Scotland, added: “Investor sentiment cooled at the start of the summer affecting pricing. The fall in sentiment and pricing was far more pronounced following the mini-budget when gilt and debt rates rose significantly.

“Whilst some investors pulled out of deals, there are still some under offer that are being renegotiated. There is no doubt that pricing has moved out, but we have seen little evidence being created. We expect sentiment to improve and more transactions to take place when there is more certainty in the debt market.”

Colliers noted that £70m of deals were concluded in the retail sector in the third quarter, driven by the acquisitions of Glasgow’s West End Retail Park and Cumbernauld Retail Park for £34.5m and £24.5m. Office deals slowed from £340m in the second quarter to £40m in quarter three.

While the third-quarter figure was the lowest quarterly figure since 2020, the £520m of office deals seen in the first nine months of this year exceeded the full-year figures for both 2020 and 2021, Colliers said.