Office investment in Edinburgh has quadrupled in the first half of 2013 to £134m, according to research from BNP Paribas Real Estate.
Just £32.7m was transacted in the city during the whole of 2012.
The leap was mainly due to two major deals. The largest was Munich-based fund manager GLL Real Estate Partners’ long-awaited purchase of Carlton Square for £56.75m – a yield of 7.25%. The other notable deal was M&G Real Estate’s £46m purchase of Waverley Gate, reflecting a yield of 7.3%
Gavin Willins, BNPPRE’s head of Scotland, said: “As investors increasingly look for opportunities outside London, investor demand for quality assets within the UK’s regional markets has intensified. However, the limited supply of high-quality office stock is likely to frustrate current appetite.”
Willins said competition for quality assets would “result in yield compression, with buyers and sellers being in a tighter and readily accepted yield band”.
Taking into account deals currently under offer and an element of new stock, BNPPRE anticipates transactional volumes of around £300m to the end of H2 2013.
Its report says several lease events due to take place between 2015 and 2017 are likely to result in occupiers securing space by way of prelets because of the dearth of available grade A stock.
However, a wholesale return to speculative development still remains unlikely in the short term.
Meanwhile, after a period of inactivity, west Edinburgh has begun to experience considerable letting activity in the first half of this year.
Take-up in H1 2013 was 294,645 sq ft, up 28% on H2 2012. The average size deal was below 10,000 sq ft.
lisa.pilkington@estatesgazette.com
