Commercial property investment activity in Scotland fell by 66% to £570m in H1 2023 compared with the same period last year, according to the latest data from Colliers.
Although investment in Q2 reached £320m – an increase on the £250m recorded in Q1 – activity was 35% below the five-year quarterly average of £490m. The average lot size of the 30 deals completed in Q2 was £10.7m – only slightly below the five-year average of £11m.
Hotels accounted for 35% of all investment activity by value in Q2, offices accounted for 28% of activity and retail accounted for 17%. Industrial volumes for the quarter were below £10m and the £100m recorded in H1 2023 was 70% down on the same period last year.
The largest transaction in the quarter was the £85m sale of The Caledonian hotel in Edinburgh (pictured) to Henderson Park.
Oliver Kolodseike, director in the research and economics team at Colliers, said: “As with all markets across the UK, Scotland is no stranger to the limiting impact that high interest rates, cost of living and the cost of construction is having on the market. While there’s no silver bullet that can help, it would seem we are reaching peak in interest rates and as such some pressures should ease as we head towards next year.”
Elliot Cassels, director in the national capital markets team at Colliers Scotland, added: “Whilst the vast majority of investor appetite is for ‘beds and sheds’ there is still appetite for all sectors – but at adjusted prices to reflect the market. The gap between vendor aspirations and buyer expectations has caused transactional volumes to plummet.
“Additionally, deals have generally been taking longer to cross the line. However, with many now stating interest rates are close to their peak, and inflation expected to ease we are optimistic that 2024 will bring easier conditions and increased investment volumes.”
