Tue, 31 Dec 2024 | COMMERCIAL PROPERTY
Scotland's commercial property sector is set for a 'year of opportunity' in 2025, according to industry experts.
Edinburgh-based Lismore Real Estate Advisors said a number of significant deals were already in the pipeline.
'We expect 2025 to mark a more stable recovery phase, with investors focusing on sectors and locations primed for income growth. However, with interest rates expected to reduce slowly and inflation likely to remain slightly elevated, significant yield compression seems unlikely. Early 2025 is anticipated to see investors prioritising income potential over yield shifts, with momentum building as the year progresses,' said Lismore director Simon Cusiter.
According to the latest Scottish Investment Market review from Lismore the final quarter of 2024 saw £406 million of investment transactions traded, up 6 per cent on the same period a year earlier. While volumes were 4 per cent below the five-year average, there are a number of deals due to complete in the opening months of 2025.
The research found that Scotland 'continues to be on the radar' for overseas buyers and it expects this trend to continue with recent activity in the office, industrial and retail warehousing sectors.
'Within the UK high-profile corporate mergers & acquisitions are resulting in some of the REITs being net sellers of non-core assets, with the biggest change being the re-emergence of fund acquisition activity. Property companies are starting to benefit from the improving debt landscape but the real effect of this has yet to be seen in completed deals,' the research stated. 'Private equity is becoming more active, with several large portfolio acquisitions, including assets in Scotland, recently completed, which is likely to lead to more asset sales of noncore assets or sales once value-add business plans are complete.'
Indeed, the study revealed that almost nine in ten respondents see 2025 as a year of opportunity, with fund managers and investment managers particularly positive.
However, challenges will remain in 2025 such as 'economic contraction and budget-driven pressures on retailers and recruitment'.
But Cusiter added: 'Following a challenging period, the market shows clear signs of recovery, with investment volumes rising, interest rates easing and confidence returning. As our research has shown, investor appetite for real estate remains robust but highly selective.'
Find out more about investor sentiment in the UK
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