INVESTMENT in Aberdeen accounted for nearly one-quarter (24%) of total investment in Scotland during the first six months of 2024, according to new figures from a leading independent commercial property consultancy.

Aberdeen saw its highest level of commercial property investment for the January to June since 2018, with Knight Frank’s analysis of RCA data finding that £181 million was invested in commercial property in the Granite City in the first half of the year – more than double the £78m recorded during the same period in 2023 and well above the £99m average of the past five years.

It noted that international investors were the most active buyers, representing 62% of investment volumes.

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The firm said that Lone Star Real Estate Fund’s £111m purchase of Union Square accounted for the majority of investment in Aberdeen, meaning retail accounted for two-thirds (67%) of the six-month total. Industrials was the second-most active sector (15%), while hotels were just behind in third (13%).

Union Square is home to an assortment of shops and dining establishments as well as Leonardo Hotels and a 10-screen Cineworld multiplex cinema venue. It was sold by Hammerson to Lone Star, a global private equity firm.

Alasdair Steele, head of Scotland commercial at Knight Frank, said that while the uncertainty around when interest rates will be cut has generally slowed deal activity, Aberdeen’s investment market has been “comparatively strong – buoyed by the sale of Union Square”.

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He noted: “The city has also seen a reasonable amount of activity in the industrials and hotels sectors. More generally, market sentiment remains cautiously optimistic, and we would hope to see a rise in activity in the next six months both in Aberdeen and across Scotland.”

Bringing more insight into why Aberdeen was performing so strongly, Matt Park, partner at Knight Frank Aberdeen, said: “The occupier market in Aberdeen has bounced back from the lows of the pandemic era and is settling into a much more consistent level of activity.

“That is beginning to filter through into the investment market and, although the first half of 2024 may have been skewed by the sale of Union Square, we are seeing much more interest in the other assets that are being put on the market – particularly where there is redevelopment potential or the opportunity to add value through strong asset management.”

Euan Kelly, capital markets partner at Knight Frank Scotland, agreed that the sale of Union Square had “slightly skewed” the figures but reiterated that interest in Aberdeen, particularly from international investors, was on a par with other major cities at the moment. “There is availability in Aberdeen, and it is offering investors the high yields and returns that they are seeking,” he said.

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“The issue in the central belt is lack of stock so yield-hungry buyers are looking to Aberdeen where more deals are available.”

Asked if recent heavy investment in Aberdeen and the north-east in services, facilities and infrastructure has influenced investors, Mr Kelly said: “No. I think it’s a lot more simple. Aberdeen is in a position to offer investors the returns they are looking for.”

In April, property firm Lismore Real Estate Advisors highlighted a number of major deals which were secured in the first quarter of 2024, including DS Properties’ purchase of BP’s North Sea headquarters in Dyce, near Aberdeen, for £16m.

Chris Thornton, associate at Lismore, discussing the Scotland-wide picture, said: “Key themes are emerging in various sectors, with logistics and multi-let sheds continuing to lead the way, with strong demand and limited supply driving genuine rental growth and underwriting investment rationale.

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“There are early signs of an increase in fund activity focusing on the prime retail, retail warehousing, hotel, and industrial sectors. Corporate mergers and acquisitions are increasing, leading to motivated sellers and portfolio realignments.”

He also noted that Aberdeen is experiencing improved liquidity, with a significant uptick in office and industrial volumes attracting yield-hungry buyers.”