Commercial property volumes were up 9% in the second quarter compared with last year, though two deals accounted for more almost half (48%) of market activity.
Volumes were also 21% below the five-year average, taking a further gloss off the uplift in transactions to £296 million, according to Lismore Real Estate Advisors.
Stripping out landmark transactions, such as Nuveen’s £100m sale of the W Hotel at Edinburgh’s StJames Quarter to Schroders, and Sovereign Centros’ £54.44m disposal of St Enoch Shopping Centre in Glasgow to Praxis, total investment volumes were down on the same period last year, underlining what has been another muted quarter for the market.
Chrissie Clancy, investment surveyor at Lismore said: “The UK macroeconomic outlook offers cautious optimism, with inflation softening and interest rate cuts likely in the second half, investor sentiment may begin to turn a corner.
“With a number of significant deals expected to conclude in the months ahead, we anticipate a meaningful uplift in activity during H2 2025.”
Figures for the half year from Knight Frank show that Scotland’s commercial property market attracted £750 million of investment, down 20% on the five-year average of £925m last year, though that figure is inflated by a strong recovery in 2022 and if discounted would be £769m, broadly flat. The figures are in line with the UK.
The dip has been attributed to investment markets pausing amid geopolitical tensions and a changing policy backdrop, while the Housing (Scotland) Bill’s journey through the Scottish Parliament has influenced appetite for deals in areas such as build-to-rent and student accommodation.
For the first time in recent years, hotels were the top-performing asset class, with £213m of investment. That was the second highest figure for the sector during the first six months of the year since 2020.
Lismore’s research also found that Edinburgh’s hotel market continues to outperform, buoyed by strong tourism and business travel, while the high street retail sector is also regaining momentum, with investor focus broadening beyond Buchanan and George Street to the best parts of Princes and Argyle Street, supported by limited supply and rental growth.
“Elsewhere, the market is showing early signs of renewed activity, with Glasgow offices seeing increased interest and several deals under offer,” said Ms Clancy,
“Amidst wider market volatility, logistics has emerged as a rare constant, driven by strong occupational demand, critically low supply and renewed investor appetite.”
Lismore’s quarterly investor research indicates that sentiment towards Scotland’s logistics
sector remains broadly optimistic. Over half of respondents (56%) expect to be net buyers in H2
2025, with just 10% anticipating they will be net sellers.
Appetite is strongest among institutional funds, with 71% identified as net buyers, while investment managers and property companies also indicated positive momentum. However, limited availability of high-quality stock was a recurring theme.
source