By Ian McConnell

Investment in industrial property and retail warehousing in Scotland together overtook that in offices for the first time in a decade last year, driven by changes triggered by the coronavirus pandemic, research of acquisition activity shows.

However, commercial property consultancy Knight Frank declared as it published its research that prime offices remained “highly sought after” and said it expected to see more activity in this sector in coming months, noting good value in Edinburgh and Glasgow relative to many other European cities.

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Retail warehousing and industrial property in Scotland saw combined investment of £541 million last year – up nearly 45% on the corresponding figure of £374m for 2020 and an increase of 29% on 2019. The £541m figure accounted for nearly one-third of commercial property investment in 2021. Investment in retail warehousing totalled £256m in 2021. Industrial property investment was £285m.

In 2020, investment in offices in Scotland had, at £376m, been only marginally ahead of the combined total for industrial property and retail warehousing. Office investment tumbled in 2020, having totalled £739m in 2019. In 2021, office investment totalled £355m, marking a sharp slowing of the rate of decline.

Investment in commercial property in Scotland totalled £1.665 billion in 2021, according to Knight Frank. This was up from £1.398bn in 2020, but down sharply from £2.106bn in the pre-pandemic year of 2019.

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Of Scotland’s three largest cities, Glasgow saw the highest level of investment, at £475m. Edinburgh was in second place at £429m. Aberdeen accounted for £54m, a near-50% increase on 2020. Overseas investors were again the most active buyers in Scotland in 2021, accounting for around 44% of investment.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Last year’s investment figures highlight the changes to investor demand since the pandemic began, with an almost insatiable appetite for retail warehousing and industrial property driven by changes to people’s shopping habits. That only looks likely to continue in 2022."

He added: "With a return to office working and the continued strength of industrials and retail warehousing, there could be a lot of activity in Scottish commercial property over the next 12 months – particularly from overseas buyers, as travel restrictions ease.”

A separate survey published yesterday by real estate adviser Savills showed the Scottish hotel market saw investment volumes reach around £185m in 2021, a 166% increase on the £70m transacted in 2020 and up 12% on the 2019 total of £165 million. Savills noted the total investment figure for 2021 was transacted across 18 hotel deals, with international buyers accounting for 46% of the deals

Steven Fyfe, associate director at Savills, said: “Despite the inevitable impact of hotels essentially being closed during the pandemic, Scotland was high up the staycation list when restrictions began to ease after the first lockdown. Our hotel market has performed relatively well over the last 12 months and we have seen renewed interest from investors...This is evidenced by many deals taking place during the first half of the year when hotels…had not fully reopened. When hotels did open in May 2021, it generated further confidence in the market.”