Edinburgh has topped the commercial property investment league table according to a study released recently.
Ranking first in a list of ten, the Scottish capital has been named as the most attractive location for commercial property outside of London.
Research into British property investors, led by legal firm Morton Fraser found that one in four (25%) of property investors were open to the idea of investing in Scotland and one in ten (11 %) were actively monitoring or pursuing opportunities.
The report stated the top five criteria for investing in the Scotish property market to be:
Rental yield (46%)
Capital growth (30%)
Stable, predictable tax / regulatory framework (26%)
Politcal stablitly (23%)
Earnings growth (23%)
Over half of investors (52%) named Edinburgh as an attractive investment choice, it was closely followed by Bristol (48%) and then Manchester at (40%).
“The three ‘net positive’ cities in our league table have demonstrated real economic resilience since the recession. Their success in protecting inward investment, attracting business and talent, and developing infrastructure means property investors can more easily envisage long-term gains” said David Stewart, commercial real estate partner at Morton Fraser.
The majority of the investors found these top three cities to be an attractive proposition. However, the remaining seven cities received more ‘unattractive’ ratings.
The top three cities were followed by Leeds and Cardiff (31%), Glasgow (30%), Birmingham (26%), Newcastle (21%) and Dundee (17%).
Aberdeen (16%) was rated as the least attractive location for commercial property investors. This could be due to local economy’s reliance on energy, falling oil prices, thousands of job losses and the contraction of the oil and gas industries.
Morton Fraser believes that Leeds, Cardiff and Glasgow can all expect to move towards a net positive investment score due to over 30% of investors deeming them attractive locations.
All three cities have also negotiated city region deals worth approximately £3 billion with the government.
Stewart also explained that:
“Demand for equity stakes in commercial property vehicles has increased in recent years as investors seek value and flexibility in the asset class. City region devolution will play a key role in ensuring investors see regional locations as positive income generating opportunities”
“That said, experience shows that a good property investment can withstand economic fluctuations and the right opportunities can be found in all these locations”.
Despite reports earlier this year claiming that British investors were wary of Scottish property investment, Morton Fraser's research also showed that in the event of Britain leaving the EU, 85% said that Brexit would have no impact on their investment decisions, whereas there was an even split amongst those who were more or less likely to invest (7% on each side).
With regards to the Scotish independence, the report showed that 15% were less likely to invest if Scottish independence was gained and 79% stated that it would have no impact on their investment decisions.
Stewart commented:
“It is easy to overestimate the potential impact of Scottish independence on the property market. Investors are ready to enter the market if the right opportunity arises, regardless of the political status of the country. That gives us optimism for the future of the Scottish real estate industry.If the price is right and the market conditions are at least on a par with other regional areas across the UK, investors will follow the returns. The prospect of a neverendum in Scotland may drag investment, but it’s not the deciding factor for many.”
“Many investors are prepared to overlook ideological or political issues to run the rule over Scottish property investments. The ‘yield gap’ between Scotland and other regional cities in the rest of the UK can always be met with a quality opportunity – whether you are looking to invest in Edinburgh or Manchester / Glasgow or Bristol, a high-quality asset will always stand on its own merits.”
The leader of Edinburgh council's economy committee, Gavin Barrie, said that he was delighted that the city was ranked at the top of the list of investment locations.
"We have major investment going into the St James Quarter, the New Waverley scheme, the Haymarket development and the continuing development at Fountainbridge.”
"I have any number of people coming to speak to me about opportunities to invest in all kinds of developments -housing, office and retail.”
"And people recognise it's a great place to be in, live in and invest in."
