A £200 million pipeline of deals, currently under offer in the Scottish market, is evidence of underlying demand in what has been a subdued period, according to new data.
Lismore Real Estate Advisors said investment transaction volumes reached £358 million during Q2, up 21% on the same period last year but are still 7% below the five-year quarterly average.
Hotel and purpose-built student accommodation (PBSA) transactions dominated activity, accounting for 67% of the total.
The hotel sector also saw one of Scotland’s largest-ever investment deals, with the five-star Cameron House Resort on Loch Lomond sold for a reported £100m to London-based KSL Capital Partners.
Chrissie Clancy-Crofts, senior surveyor at Lismore, said: “Whilst the quarter has been characterised by relatively limited transactions and – with a few exceptions – smaller lot sizes, opportunities remain for vendors looking to capitalise on more captive buyer pools.
“We estimate that there is well in excess of £200 million of deals currently under offer in the Scottish market. Although the summer holiday period may push completion of some transactions into late Q3 or early Q4, the strength of the pipeline provides encouraging evidence of underlying investor demand.”
She added: “A shortage of core investment opportunities has suppressed Q2 volumes, yet investor appetite remains healthy.
“UK institutional fund activity is relatively sporadic, allowing for private (equity) buyers to see the opportunity but the traditional debt backed buyers continue to contend with a fluctuating debt market.
“This period of volatility seems set to continue, making the underwrite for core plus assets more challenging.”
Ms Clancy-Crofts said that within the logistics sector, assets offering robust rental reversion, or those benefiting from guaranteed income growth, have remained particularly sought after.
Edinburgh offices remain “compelling,” she said, with rental growth taking city centre Grade A space to just under £50 per sq ft and the strongest retail pitches in both Edinburgh and Glasgow continue to experience competition among retailers for the best space, supporting further rental growth.
“Despite wider market uncertainty, demand for well-priced prime assets remains strong, particularly in logistics, retail warehousing and high-quality PBSA.
“Private investors are capitalising on opportunities as debt-backed buyers face tighter lending conditions, while scarcity continues to drive competitive interest. We expect development activity to remain focused on sectors where viability and long-term fundamentals are strongest.”
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