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Scottish commercial property sees Q2 transactions down 15%, but momentum is building

Scottish commercial property sees Q2 transactions down 15%, but momentum is building

General Election market uncertainty contributes to a slower market says Lismore’s Chris Macfarlane

On the eve of the 2024 General Election, leading independent property advisory firm, Lismore Real Estate Advisors has published the latest figures on the commercial property market in Scotland for quarter two of 2024.

Transaction volumes totalled £272 million, down 15% on Q2 2023 and 31% below the 5-year average.

A smaller number of larger ticket sales, combined with continued uncertainty in the market over the timing of future interest rate cuts and the impending General Election have affected transaction volumes.

The largest deal of the quarter was the £45.8 million acquisition of 1 West Regent Street in Glasgow, by Corum Asset Management, followed by Remake Asset Management’s £36.6 million acquisition of HQ buildings, 2 Greenmarket in Dundee and 4 Pacific Quay in Glasgow, let to BT and STV respectively from LondonMetric.

Other noteworthy transactions include Ropemaker Properties £14.725 million sale of four prime industrial units at Fullarton Drive in Cambuslang to clients of Ediston and the £23.5 million off-market sale of Malmaison at St Andrew Square in Edinburgh by Associated British Foods to clients of Patrizia.

Logistics and multi-let industrials continue to see strong demand, with prime yields around 6%. Office yields are improving, while retail parks offer compelling value with 6.50-7.00% yields. High street properties in prime locations and living sector investments remain attractive and prime BTR and PBSA yields are stable at 5.00-5.50%.

Lismore Director Chris Macfarlane said: “Despite a slower than anticipated quarter, buyer-seller standoffs are easing, with increased buyer activity and momentum improving.

“Fund activity remains selective and quite opportunistic, focusing on living and logistics sectors, with retail warehousing gaining interest. Core-plus buyers may benefit from potential interest rate reductions, whilst private equity shows interest in pressured sales and good-value, long-leased stock, indicating less distress than expected and expanding their investment scope.

“We anticipate that the expected interest rate cuts by autumn may improve debt terms, although development continues to be hindered by stubbornly high build costs and uncertain exit pricing.

“Amid the General Election, we hope the victor fosters optimism, creating a business-friendly environment for sustained economic growth. Effective governance is crucial for job creation, economic prosperity, and social well-being. Change brings opportunity; let’s hope for competent leadership to drive our future forward.”

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BDC 319 : Aug 2024