Returns from investments in Scottish commercial property continued to improve in Q4 of 2013. Total returns in the market increased to 3.3 per cent over the period, compared with 2.3 per cent in Q3, according to the latest figures contained in the Scotland Property Quarterly report from CBRE.
Total returns came in at 7.3 per cent for last year, which was a significant increase over the single percentage point recorded in 2012. The fourth quarter recorded the strongest showing since the first quarter of 2010.
The report mentions that the findings indicate that the recovery has “firmer foundations and is more sustainable.” It also states that even though the commercial property sector in Scotland has started to close the gap between itself and the rest of the UK, Scottish properties are “continuing to underperform.”
Aileen Knox, a senior director at CBRE (Scotland), has cautioned that in spite of growth in estimated rental values (ERV) in the retail, office and industrial sectors, growth remains limited to specific locations and prime properties in the market.
Ms. Knox noted that there had been a considerable increase in the volume of commercial property transactions in 2013, with £1.78 billion booked. This figure represented a significant increase over 2012 and higher numbers than any year since 2007.
Nearly half of the transactions by value took place in the last three months of the year. With significant rises in office and retail deals.
The largest volume increase was in the retail sector with £742 million. This figure compares with £233m the previous year.
The Aberdeen market continued to outperform those of Glasgow and Edinburgh. This lead was most pronounced in the industrial and office sectors which produced annual total returns of 16.7 and 15.5 per cent, respectively.
However Edinburgh and Glasgow were starting to catch up. Edinburgh offices recorded an annual return of 11.6 per cent, and the industrial sector in Scotland’s two largest cities delivered returns of 8.4 per cent.
These were the only other two cities to outperform the all-property Scottish total return.
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