The Scottish investment market has seen an increase in transaction volumes during the second quarter by 71% from the first quarter, according to a Lismore’s quarterly review.
Edinburgh-based property firm Lismore predicted “positive times ahead” for the Scottish investment market as it starts recovery from pandemic.
The firm reported that the investment market saw around £300m being traded, although, it did note that activity remained 30% below the five-year average due to the pandemic.
It has predicted that the second half of the year will be more positive, with around three transactions worth more than £50m understood to be in the works.
The review indicated that prime logistic yields are continuing to harden at 4.50%. The yield from prime offices in Edinburgh are expected to increase before the end of the year, due to the limited stock and occupational demand.
In the value-add sector, offices capable of re-positioning, first generation retail warehousing with underlying industrial or residential potential are in demand, albeit the market remains relatively tight for these kinds of deals.
The quarterly review reported that the Scottish logistics market was witnessing a strong rebound following the pandemic.
The review stated: "occupational demand has increased dramatically with something like around 1.5m sq ft of unsatisfied requirements in the central belt, against a real dearth of new development."
It noted that the rents are rising and yields are hardening, but still lag behind the prices for prime property in England.
Speculative development is becoming more feasible with the demand and supply imbalance. Lismore is predicting developers willing to take the risk will be rewarded later citing the new Belgrave Logistics Park as the best example of current speculative developments.
Knight Property Group founder and chairman James Barrack comments: “This is the strongest occupational market we have seen in the past 25 years. There has been a structural shift in the demand for the industrial and logistics sector, particularly with the exponential growth in online shopping, which should lead to longer-term more sustainable growth.
“The future hot spots for speculative development in Scotland will always be driven by location, although quite rightly, the ESG agenda is also moving towards the top of occupier’s requirement criteria. With rising construction costs, the short term winners could be average quality second hand stock which could witness rental improvement if the new build pipeline slows.”
Simon Cusiter, director at Lismore added::Appetite is strong across the board in the industrial and logistics sector, but we are certainly witnessing a “tiering effect” when it comes to sub-sectors and rents.
“With continued demand, pressure on land and low availability of fit for purpose stock, a rise of 2.5% per annum over the next three years could certainly be achieved. Some commentators are suggesting that Europe needs an additional 300m sq ft of industrial stock by 2025. With the UK’s share being in the region of 60m sq ft, this could spell good news for developers and landlords”
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