The sale of one of Scotland's most famous hotels in an £85 million deal helped bolster the country’s property market.

The acquisition of the Caledonian Waldorf-Astoria Hotel by private equity real estate manager Henderson Park and hospitality operator Klarent Hospitality comes at a time when a former real estate frontrunner, the city office, might be looking for reinvention.

It was hailed as one of the biggest UK deals of the year.

Two leading industry figures cite a series of headwinds and point to hotels, which are reaching new heights in the Scottish capital, and industrial property as being in more positive territory this year.

Alasdair Steele, a partner at Knight Frank based in the Scottish capital, said: "It has been a hard year, as everyone would say.

"We’ve had a disconnect between the occupier markets and the investor markets but in a different way from usual, where some of the occupier markets have been very strong and investment markets have been challenging, with all the headwinds that we’ve had from the economy in general.

"The rhetoric that has come out of it has been we are in more of a table mountain effect rather than a swift recovery.

"Having said that, I think there are some positive signs now that suggest things will improve in 2024.

"In this year, Edinburgh has again done pretty well, all things considered.

"Transactional volumes have been at a fairly impressive level which I think is testament to how liquid the city is and how desirable it is for investors, and we’ve seen that across the various different uses to be honest."

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He continued: "The likes of the Waldorf-Astoria trading is obviously a significant deal and I think we will see again a lot of focus on beds and sheds going forward.

"The hospitality sector in Edinburgh is in rude health.

"We are seeing a lot of hotel operators still desperate to get into the city, which at the same time is causing challenges for the office market as that has fallen out. We’ve seen two buildings in St Andrew Square both being sold to hotel operators."

Dalata Hotel Group, Ireland's largest hotel operator, is one. It acquired a development site at 28 St Andrew Square for £12.5m from Aviva Life and Pensions for its plans to open a 153-bedroom hotel on the famous New Town square.

An A-listed office block at 9-10 St Andrew Square, designed by Basil Spence and Partners as the new head office of the Scottish Widows Fund and Life Assurance Society in 1962, was sold amid plans to turn it into a hotel. Tristan Capital Partners’ fund European Property Investors Special Opportunities 6 and Queensway acquired the site.

Mr Steele said the city "needs to find a balance" between the leisure and hotels market and the office market which he said is "the one that has suffered the most".

Elliot Cumming, property director at HFD Group, the company behind Glasgow's largest single office building at 177 Bothwell Street which it built and last year offloaded to Spanish investment firm Pontegadea for a reported £215m, also pointed to the steady stream of challenges.

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These include the hangover from Covid, Russia's war on Ukraine and a wider inflationary environment over the last 18-24 months.

Logistics has also been impacted by a dip in online buying, he said.

"It is safe to say that the market has been tough the last year. Pretty turgid, but we are still slowly rumbling forward.

"There are certain areas that are still doing quite well, industrial being one of them, but then the cost of living crisis and all the things that entails means that the retail spending has been slightly down, so slightly less Amazon vans on the road because people’s pound in the pocket is not going quite as far.

"I don’t think there is any sector that has been immune to the effects, frankly. We obviously exist in the office sector primarily, and we are seeing small shoots of positivity, but that is against still a pretty tough backdrop.

"The wider economy, the inflationary pressures had an effect on us from a development standpoint … it means that new development is tough."

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Mr Cumming also said: "The Glasgow market is going through a bit of a period of transition. These transitional periods can take years and decades perhaps to work themselves through, but I think from a wider standpoint perhaps not getting into the last year or the next year but the landscape.

"You are sitting in Glasgow with probably two million square feet of vacant offices. It sounds like a large amount and it is but a lot of that stock is just not fit for purpose.

"You wouldn’t be able to occupy it sufficiently as a modern office occupier, so what you have this big rump of offices sitting there that are actually fundamentally not fit for purpose, and you have this flight to quality where all the occupiers are wanting to take the shiniest space."

It leaves the question of what to do with the "redundant" estate.

Mr Cumming said: "There are policies from a local government standpoint that are seeking to address this, but it is still early days.

"The implementation of that is not straightforward. Trying to turn a terraced office into residential is not as easy as one would think. There are a lot of different things in there that we need to unpack and frankly the planners need to get comfortable with this conversion.

"We are at a really early stage of that, but that potentially gives us some optimism in the longer term.

"The return to city centres for general population, so as in people living in the city centre, that could be a real positive change for Glasgow, breathing life back into the city."