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UK investors wary of Scottish property investment

noImage Melanie Luff

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Last year UK investment in Scottish commercial properly fell sharply from the record highs of 2014 amid worries about the independence debate. Now it seems ‘Brexit’ is fuelling wider concerns for investors.

Since the independence referendum in 2014, the Scottish property scene has seen an influx of foreign investors as those from the UK back away, says Kevin McCabe, founder of property developer Scarborough Group.

“There is no question that the UK institutions are stepping back from Scotland”

“It’s all the talk of [another] referendum that could be sooner rather than later.”

While Scottish voters rejected independence 55 per cent to 45 per cent, the Scottish National party (SNP) has seen a surge in popularity and there has been widespread speculation that the EU referendum could trigger another Scottish independence referendum.

In 2015, the value of commercial property in Scotland grew 4 per cent, reaching a total of £3.5 billion according to the Scottish Property Federation.

However, property agents and market experts have stated that the 4 percent rise masks a downward trend in investment by UK institutions.

Alasdair Ramsay, Senior director at property consultants GVA in Glasgow, says that “UK institutional investors mention political risk a lot” and many are reluctant to invest due to the “emotional trauma” associated with a break from the UK.

However, this doesn’t seem to be a problem for international investors and the “the void is being filled by private equity sources of capital overseas” says Ramsay.

“A number of the big international investors have said they are used to investing in different countries and currencies. Scotland is no different and probably less risky than most.”

David Melhuish, SPF director of research group CoStar, states that investment in Scottish commercial property fell by 41 per cent year-on-year to £2.2bn last year.

But despite this slow economic growth, they state that 2015 was still above the 2008 – 2014 average of £2.7 billion per year.

He also revealed that foreign investment accounted for over a third of the total in 2015, up from a fifth in 2014, whereas, domestic investment was down 46 per cent.

According to property group JLL, foreign investment made up 59 per cent of the market share in Edinburgh and Glasgow last year, higher than everywhere else in the UK bar London at 56 per cent.

Capital markets director at JLL, says:

“Until there is more clarity on the political landscape, the UK institutions will continue to be cautious on Scotland”


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About The Author

Mel wrote for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other global industry publications.

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