Investment in Edinburgh’s commercial property market has already exceeded last year’s total, despite the tough economic backdrop.
Knight Frank’s analysis of Real Capital Analytics data found that £596m of commercial property has changed hands in the year to date in Scotland’s capital, up on the £555m during the whole of 2022.
Investment in retail property is up nearly 70% to £170m from £102m last year, and is on track for its best 12 months since 2017. Among the retail assets in Edinburgh to trade hands during 2023 are Craigleith Retail Park and Corstorphine Retail Park.
Offices have been the biggest source of deal activity, with £189m of assets being traded so far – broadly on track to match last year’s £255m. Argyle House, the well-known brutalist office block below Edinburgh Castle, was sold this year in one of the city’s biggest office deals of 2023.
Hotels have also been an active sector, with £114m of deals. The figure is the second-highest in the past five years, after 2021’s £196m. A deal for Edinburgh’s Waldorf Astoria was announced in July and several properties on St Andrew Square have been purchased for redevelopment as hotels.
Institutional buyers have been behind 41% of investment volumes in the city during 2023 to date, with international investors representing a further 37%. Edinburgh has accounted for around 46% of total investment in Scottish commercial property so far this year.
Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Commercial property investment volumes in most UK cities have fallen on the back of rising interest rates and the attractive returns available on cash and safe assets like bonds. But Edinburgh’s investment market has remained resilient, with deal activity already exceeding last year.
“Part of the reason for that is the compelling fundamentals the city continues to offer. The occupier market has remained strong throughout the challenges of the past few years, with limited development sites and office space being converted to other uses. The hotel market has bounced back from lockdown and the city’s retail stock is also adjusting to a period of change.
“With a number of assets currently on the market and buyer and seller expectations increasingly moving closer together, all things being equal, we could see a flurry of deals in the city before the end of the year and a positive start to 2024.”
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