Scotland seemed to have somewhat of a varied 2017 in regards to their commercial property sector. On one end of the spectrum, the market saw a record high year of investment with £2.3billion and on the other, potential fears were caused by the merger of Aberdeen Asset Management and Standard Life. All in all, 2017 was quite a positive year for the market that looks set to blossom further in 2018!
The investment figure of £2.3billion was 37% ahead of the ten year average for the country. Savills reported that one of the key reasons for the height of the figure was the 36 deals to the value of £20million or more, this is in comparison to 14 deals of the same size in 2016. It is interesting to see how the level of capital investment has increased in a relatively short space of time, the result is clearly positive for the area and is likely to continue and benefit those who aren’t directly involved in the deals also.
The level of investment was an increase from £1.9billion in the previous year, a somewhat substantial increase, especially when considered that 2016 was the year that TH Real Estate forward funded the redevelopment of Edinburgh St James’. This was one of the largest pre-let deals that Scotland has seen in recent years, amassing over £1billion in total deal volume. The 2017 investments were well spread across a variety of different main cities, Edinburgh and Glasgow both experiencing 35% and 38% respectively whilst Aberdeen had 8%. Furthermore, based on the basis points system – which calculates the how attractive a city is for investment – all three of Scotland’s major cities are above the average in the United Kingdom. Together it paints a positive picture for the market over the last 12 months!
Of course, the merger seemed to steal the vast majority of the commercial property headlines in Scotland last year. Six months on, and the debate continues about the internal and external impacts. The more recent news of Lloyds Banking Group withdrawing from the £109billion asset management deal they originally had with Aberdeen Asset Management has created the merger to once again be brought into question. An analyst at Hargreaves Lansdown (Laith Khalaf) stated how this undermines the merger and how the idea was to create scale and benefit from the combined sources.
How will Scotland fair in 2018?