Commercial property in Edinburgh

24th August 2016

Unsurprisingly the post-Brexit commercial property market has felt somewhat uncertain, many corporate investors have held off making deals in order to wait for the market to balance and clarity to be restored. However, for those who have continued to invest in this time of uncertainty, it appears that heading north is a very attractive choice. Edinburgh has proven particularly popular in recent months due to ongoing redevelopment projects across the city. Investment in Scotland’s commercial property market increased by a third in the first quarter of the year and it seems that the buoyancy of the market is set to continue.

In the run-up to the referendum, Scotland’s capital emerged as the most attractive British city for commercial property outside London. Following the outcome of the vote businesses have begun to consider making the move north and a string of new deals have recently been made, including new tenants in the Waverly Gate office building. Argyle House, which is home to one of Europe’s largest technology companies, has also been the backdrop to a significant investment when it sold for £40m.

The lower cost of living in Scotland is likely to have encouraged the continuing investment in Scottish property. It is clear that the country offers investors an attractive income yield and there is a great opportunity for capital growth, particularly now when capital growth elsewhere is starting to slow. Massive investments have been made to a range of Scottish cities including Edinburgh, Aberdeen and Glasgow. This injection of funding again increases the attractiveness of investment opportunities in Scotland and appears to be drawing people away from London.

Investment opportunities in Edinburgh are not only coming in from London but also from across Europe. Overseas investors accounted for 41% of commercial property investment in Scotland in 2015 and it is reported that further deals from the continent are expected in the latter part of this year. The M&G Quartermile 4 building has seen an increase in value of around £15m since 2014 following the signing of two new tenants. The property is now anticipated to hold a value of around £65 million, a Germany real estate investor firm is said to be behind a deal expected to complete soon, highlighting the importance of foreign investment into the city.

There remains a strong demand for property in Edinburgh which is continuing to drive prices up, both in commercial and residential property. However, with a potential second independence referendum on the horizon it is unclear how long this trend will continue for. Another bout of uncertainty could potentially knock the wind out of Edinburgh’s sails, but for now it appears that the city is likely to continue as the hottest place to invest in property.

Tony Freeman
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