Scotland Edinburgh Continues to Ignite Investor Interest
as the most important factor for investment into the city.
Over the next six months, 44% of respondents selected living as their most favoured sector for investment with the office, retail and industrial sectors accounting for just under 20% each. Property companies, funds and private equity investors all favoured the living sector with only investment managers more evenly split across the sectors.
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90% of investors open to investing in the capital in H2 2024, according to Lismore research
Investor research by leading independent
property advisory firm, Lismore Real Estate Advisors has shown that 90% of investors would consider investing in Edinburgh over the second half of 2024.
Edinburgh’s international appeal, vibrant culture and strong
educational foundation make it a highly attractive investment destination. Respondents also cite its thriving financial and tech sectors, robust rental growth in prime city centre offices, a resurgent prime retail sector, along with the strongest regional hotel sector in the UK.
Key to Edinburgh’s success is its cross sector appeal, which was cited by 32% of respondents
For an expert view, Lismore interviewed Craig McDonald, Principal and Managing Director of Ardstone Capital UK, who said: “The city offers a unique opportunity with its limited supply of Grade A office space, especially appealing in the office and retail sectors.
“Given the critical office supply shortage, over the next 12 months, we anticipate that rents may rise to close on £50-£52.50 per square foot for Grade A space. With the St James Quarter now full and other new entrants coming to the city, the case for opportunities with properly re-based rents in the best retail pitches of Princes Street and George Street, is compelling.
“In the short to medium term, key sectors driving
Competition remains strong for PBSA sites in the city, with demand and supply dynamics continuing to prove attractive. However, it was noted that clarity over the Housing Bill and rent controls is required to unlock pent up demand for BTR investment.
demand include tech and the enduring financial services sector.
“Despite political uncertainties, our investment decisions are driven by solid property fundamentals and Edinburgh’s unique characteristics make it a prime location for investment.”
Chris Macfarlane, Director of Lismore added: “Edinburgh remains a vibrant capital city, with a healthy cross sector occupational market provide a compelling investment case.
“Top quality well located city centre offices with strong ESG credentials continue to attract a broad range of investors including UK institutions, overseas pension funds and high net worth individuals, drawn by the city’s global appeal and strong market dynamics.”
“With limited development and high demand, prime rents at £45 per sq ft signals healthy growth over the coming years. Strong rental growth is also expected for student accommodation and prime high street retail.
“Edinburgh has shown through good times and bad that it’s key markets remain liquid and with a broad investor base, Scotland’s capital is a serious proposition for any investment decision.”
More detailed research findings and expert views from Craig McDonald and Chris Macfarlane can be found in the Lismore Quarterly Review for Q2 2024
Prime Edinburgh Office Rents Grow at Fastest Rate Since 2015
Prime city centre office rents in Edinburgh are rising at their fastest rate in nearly a decade, according to analysis from Knight Frank.
The independent commercial property consultancy said that during 2023 prime office rents rose by 8% from £40 per sq. ft. to £43 per sq. ft. This was the largest increase since 2015’s 11% and well ahead of the 5% annual average since 2014.
Despite the challenges the Covid-19 pandemic presented to the office market and the shift towards hybrid working, prime rents have risen in Edinburgh from £35.50 at the end of 2019 to their current level – a 21% increase.
Knight Frank’s analysis suggests that continued demand for space and a constricted development pipeline could push prime rents in Edinburgh city centre up again by the end of 2024. Edinburgh’s overall vacancy rate remained at around 11% during the second quarter of the year, but new and second-hand Grade A availability has fallen to less than 0.4% and 6.7% respectively.
Andrew Hill, lease advisory partner at Knight Frank Scotland, said: “Rents for prime offices in Edinburgh have risen at a significant rate in the last 12 months. A big contributor to this has been the flight to quality we have seen since the Covid-19 pandemic, with occupiers favouring quality space in prime locations, with good access to amenities. At the same time, there has been very limited supply of stock coming through and that has put upward pressure on rents for in-demand properties.
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“With so little in the development pipeline and a lot of existing office space being repurposed for other uses, the Grade B and C properties are also holding up well. There is a particular lack of stock in the city centre for smaller suites of below 5,000 sq. ft., which is one of the main contributing factors to rising rents in these markets.
“As a result, it’s more important than it has been for some time for landlords and occupiers to begin discussions early when lease events are on the horizon, seek representation from an adviser, and collaborate over any planned changes to rents.”
COMMERCIAL PROPERTY MONTHLY 2024
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