Edinburgh office investment surges thanks to Koreans

Report also shows that most of the big deals in the Scottish capital are being conducted off market. Picture: Contributed

Investment in Edinburgh offices in the first six months of the year has outstripped last year’s annual total as Asian buyers target the capital, a new report reveals.

Property consultancy Knight Frank pointed to a flurry of major deals in the second quarter of 2019, helping to take total investment to nearly £310 million between January and June. That puts the 2019 to-date figure comfortably ahead of the previous 12 months’ total of £284m.

The six-month figure was buoyed by two recent deals.

In May, one of Germany’s largest pension funds purchased 4-8 St Andrew Square for £120m. The city centre buildings house offices for pensions and investment giant Standard Life Aberdeen, a number of restaurants including The Refinery, The Ivy and Gaucho, as well as a large TK Maxx store.

SLA’s investment arm, Aberdeen Standard Investments, and Peveril Securities were responsible for redeveloping the site in 2016 under a joint venture.

The acquisition of 4-8 St Andrew Square was followed in June by the £100m purchase of the Leonardo Innovation Hub at Crewe Toll by an unnamed Korean investor.

Earlier in the year, a £55m property at Gyle Square was also acquired by Korean investors.

Korean funds have now made four major purchases in Scotland since their first transaction in 2017, including the £48m deal for Glasgow’s 110 St Vincent Street just last month.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “It’s been a great start to the year in Edinburgh, with a number of large transactions for major assets.

“That we had two nine-figure deals conclude against an uncertain political and macro-economic backdrop is testament to the strength and diversity of demand for prime commercial property in the city.

“There is an almost insatiable appetite among investors for secure long-dated income and prime offices. Despite Brexit, Scotland is seen as providing stability at a competitive price.”

He added: “What’s noteworthy about most of the major transactions in Edinburgh is that they are being conducted off market by overseas money.

“While it might seem counter-intuitive to limit the number of interested parties by seeking out specific buyers, it’s turning out to be the best way of concluding deals.

“The purchasers know they stand a good chance of acquiring the asset and are willing to pay a premium in return.”

A study published last week by fellow property adviser CBRE showed that the Edinburgh office market was in a “healthy” state.

Take-up of office space in the second quarter amounted to 176,549 square feet – just 9,210 sq ft shy of the previous quarter’s tally. Annual take up at the end of Q2 2019 was up 2 per cent on the previous 12 months.