Nearly £3bn of commercial real estate changed hands in Scotland in 2014, with the volume of deals soaring by almost a third on the previous year according to the latest statistics from global property agents Cushman & Wakefield.
In a bumper year for the market, £2.77bn of property was sold compared to £2.09bn in 2013 with retail deals such as the £224m sale of The Centre Livingston accounting for the largest proportion of the market (37%).
Major office deals included the sale of Scottish Widows HQ in Edinburgh for £105m and the new Aker headquarters near Aberdeen Airport at £127m, while the biggest industrial deal was the sale by Hermes of the Hillington Park estate for around £120m.
Steven Newlands, Partner, Capital Markets Group – Scotland at Cushman & Wakefield, said: “For there to be such a significant rise in a year when the industry feared that the uncertainty surrounding the Referendum would damage investors confidence, is quite incredible.
“The Referendum undoubtedly did have an impact, especially in the second quarter when only £300m of transactions took place. There was very much a sense that investors were waiting to see what happened which is reflected in a late surge in activity post September 18th with deals like East Kilbride Shopping Centre coming across the line in the final months of the year.”
Despite the late flurry, volumes were still below the peak of 2007 where total volumes were £3.3bn – the wider UK has exceeded the peak volumes of 2007. However Newlands is confident that 2015 will be another good year for the investment market north of the border.
He said: “We predict another strong year for the property market and see no reason why deal volumes cannot surpass this year as vendors take advantage of positive market conditions where investment demand outweighs supply.
“There are factors which might cause some uncertainty – the forthcoming General Election and oil price fluctuations for example but overall I think that if the fundamentals like employment rates, start up companies and export growth remain strong here, then people will invest.”
He added: “The Smith Commission has a key role to play as it should extinguish the possibility of another referendum for a considerable period of time, thus diminishing investor fear of a Neverendum.”
While the institutions are expected to dominate purchases again this year – they accounted for more than half of transactions last year (55%) – Newlands expects to see more money filtering north from the overheated London market.
He said: “London is looking just too expensive for many investors, who are turning their attentions to regional markets and prime properties in Scotland in particular.”
Newlands predicts that the European Central Bank (ECB)’s new quantative easing plans will also play a part in market growth, in the UK at large and in Scotland as well. He said: “If the ECB’s new quantative easing plans are successful we expect the impact on the property market in general could be substantial as even more demand will now be diverted into the market. As a result, yields are expected to fall more than expected and volumes will be pushed further back towards pre-2007 levels.”
Newlands cautions that growth is however dependent on investors finding stock to buy, which relies on bank sales and deleveraging as well as profit taking and stock recycling.
He added: “We may also see a long awaited move back into development, helped by recent falls in commodity prices softening build costs. In addition there may be more corporate activity – including asset sales by corporates, joint ventures and takeovers.”