A ‘ONCE in a generation’ opportunity has arisen for wealthy individuals and families to snap up prime commercial property in Edinburgh, it has been declared.

Property firm Knight Frank has said expensive debt, high interest rates, and attractive bond yields means that many investors who would typically invest in the city’s mid-sized retail and office assets, often in the New Town, were pausing for thought.

The hiatus has opened a window for wealthy Scots, family trusts, and private investors to acquire some of Scotland’s most attractive commercial property, according to Knight Frank, which points to a number of deals secured over the last year.

It highlights the purchase of 7 Castle Street, the buildings home to Contini and Black Sheep Coffee on George Street, and a Princes Street retail outlet occupied by jeweller Swarovski, among a raft of transactions involving wealth Scots this year which between them were worth more than £40 million.

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And the property firm signalled its expectation that the trend will continue. Last year, a property which is home to Wickes’ only store in Edinburgh was sold to a UK family trust for £6 million, with all five underbidders having been Scottish high-net-worth individuals, the agent said.

Moreover, around £50m of privately held wealth also bid for a trio of property assets on George Street, which included occupiers such as high-end retailers such as The White Company, Gant, and Hackett.

Euan Kelly, capital markets partner at Knight Frank Edinburgh, said: “There are great commercial property opportunities for high-net-worth individuals looking to invest at the moment. If you know Edinburgh and believe there is value in its main thoroughfares, you are looking at an opportunity that hasn’t existed since 2008, with other buyers keeping their powder dry in the current economic climate.

“Yields on gilts and returns on cash are obviously at the most attractive they have been in the best part of 15 years. However, over the long term, property has tended to outperform them and offers the opportunity for capital growth and a degree of income protection, with a lot of rental agreements linked to inflation.

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“We have seen a great deal of interest from wealthy individuals and family trusts in assets between £5m and £20m and, even where they haven’t been successful, they have been highly competitive. They are keener to invest, and we expect to see more Scottish money buy up commercial property assets in Edinburgh throughout the remainder of the year and into 2024.”

On Tuesday last week, Knight Frank reported that overall investment in commercial property in Edinburgh had reached £596 million in the year to date, taking it above the total deal value of £555m achieved in 2022.

Its figures, based on the property consultancy’s analysis of RCA data, showed that investment in retail assets had soared by nearly 70% to £170m from £102m last year, putting it on track to achieve its best year since 2017. Retail assets which have changed hands in Edinburgh this year include Craigleith Retail Park and Corstorphine Retail Park.

Knight Frank announced in June that 7 Castle Street, which sits on the corner of Princes Street and Castle Street and spans more than 40,000 square feet of office and retail space, was acquired by FSX Holdings.

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However, while there has been strong interest in retail, the agent said last week that offices have been the biggest source of deal activity.

It found that £189m of assets had been sold in the year to date, with sales trends suggesting the market is on course to match last year’s total of £255m. Argyle House, the well-known brutalist office block below Edinburgh Castle, was sold this year in one of the city’s biggest office deals of 2023.

Elsewhere, Knight Frank said the hotel market in Edinburgh has also been buoyant, with £114m of deals already concluded this year. The figure is the second highest in the last five years, after 2021’s £196m. Prominent deals have included the sale of Edinburgh’s Waldorf Astoria, announced in July, and several properties on St Andrews Square, which have been purchased for redevelopment to hotels.

Alasdair Steele, head of Scotland commercial at Knight Frank, said last week: “Commercial property investment volumes in most UK cities have fallen on the back of rising interest rates and the attractive returns available on cash and safe assets, like bonds. But, Edinburgh’s investment market has remained resilient, with deal activity already exceeding last year.”