Overseas buyers ploughed £310 million into the city’s office market in 2016
According to international real estate advisor Savills, investment into Edinburgh’s office market in 2016 reached heights not seen since 2006 with £426 million of transactions, 73% above the 10-year annual average (£246 million).
Overseas buyers ploughed £310 million into the city’s office market in 2016, reports Savills, representing 73% of the total turnover and was 170% above the 10-year average of £115 million – the highest share ever recorded.
The firm notes that this international appetite has been accentuated by a discount from the sterling devaluation. German based funds were particularly active, with Deka Immobilien and TRUIVA acquiring Atria (£105 million) and Waverley Gate (£63 million) respectively.
Rod Leslie, associate director in the investment team at Savills Scotland, said: “Despite a turbulent political year Edinburgh’s commercial property market has attracted the greatest volume of inward investment in a decade. Following the UK’s vote to leave the EU there was a brief pause as investors took stock before returning to the market, searching for prime, well let assets on a long leases as part of a defensive investment strategy.”
Savills says the outlook for 2017 is promising with deals such as Aberdeen Asset Management selling Exchange Place 1, 2 &3 to overseas investors GLL Real Estate and HSBC Private Bank for a combined £80 million reflecting the relatively bullish sentiment in the market. The firm says Edinburgh remains attractively priced relative to comparable regional cities, with prime yields currently standing at 5.5%, as investors continue to look to the UK regions for value.
Mike Barnes, Scottish analyst in the research team at Savills, added: “Generally we see the key regional cities including Edinburgh as potentially more defensive to Brexit than London. Availability is low, particularly of refurbished space, and demand is likely to be supported by continuing north-shoring from London.
“We expect that the pound will remain comparatively weak throughout and after the Brexit negotiation process and this, combined with the income security that the UK lease offers, will stimulate a steady rise in non-domestic interest in commercial property in the UK, as we’ve already seen in Edinburgh.”
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