Investment volumes in Scottish commercial property fell 66% to £570 million in the first half of 2023 compared to the first half of 2022, according to Colliers’ Scotland Snapshot.
Investment volumes in the second quarter rose to £320 million from £250 million in Q1, but remained around 35% below the five-year quarterly average of £490 million.
The largest Q2 transaction was the £85 million sale of the Waldorf Astoria Caledonian Hotel Edinburgh to Henderson Park.
“With 30 deals completed, the average lot size stands at £10.7m, up from £8.6m in Q1 and only slightly below the five-year average of £11m,” said Colliers.
“Hotels accounted for a 35% share of all investment activity by value in Q2, followed by offices at 28%, retail at 17%, and residential at 15%.
“Activity was very limited in the industrial sector.
“Cross border capital accounted for around 38% of all activity by value in H1 2023, below the 2022 share of 46%.
“Investment outside of Edinburgh and Glasgow totalled £24m, the weakest figure since Q1 2016.
“The largest Q2 transaction was the £85m sale of The Caledonian Hotel in Edinburgh to Henderson Park …
“Investment activity is likely to remain subdued in Q3, but we expect a pick-up in Q4 when investor sentiment improves and interest rates have peaked.”
Elliot Cassels, director in the National Capital Markets team at Colliers Scotland, said: “The gap between vendor aspirations and buyer expectations has caused transactional volumes to plummet.
“Additionally, deals have generally been taking longer to cross the line.
“However, with many now stating interest rates are close to their peak, and inflation expected to ease we are optimistic that 2024 will bring easier conditions and increased investment volumes.”