Hotel deals help to boost Scottish investment

Investment in Scotland’s real estate market has rebounded, rising by 30% year-on-year in 2024. Total investment passed £2bn, a significant increase from the £1.5bn in 2023 and slightly above the £1.9bn five-year average, according to Knight Frank’s analysis of Real Capital Analytics data. Retail was the top category by total investment, reaching £710m, a 7% increase from 2023. Hotels had an especially busy year, more than doubling the 2023 total at £488m – a five-year peak. Edinburgh represented over half of hotel transactions, totalling £247m. Overall, UK hotel investment deals reached more than £5.7bn in 2024, more than double the volume recorded in 2023, according to a separate report from Savills.  Scottish office investment saw a notable rise from £368m to £509m, while industrial investments rebounded from a five-year low of £292m in 2023 to £359m. International investors accounted for roughly 44% of investment. REITs and listed property companies were notably more active in 2024, taking a quarter of deal flow, well above their five-year average of 9.5%. Private investors represented a fifth, with institutional investors accounting for 11%. Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of 2024 got off to a slow start, with the election putting a pause in activity during the second quarter. But, since June there has been a noticeable upturn in deal activity, helped by a clearer idea of what the next five years look like in terms of policy direction and interest rates on a downward trend, combined with political upheaval elsewhere. “The pool of buyers for Scottish commercial property has also got deeper, and there is good reason to believe that will continue to be the case in 2025. International investors were more active in the second half of last year and we expect the new pooled local government pension funds to be actively looking for assets next year to up their weighting to commercial property, in general, but also to Scotland.” Steele added: “There has been a lot of interest in hotels over the last 12 months, with no signs of that stopping – particularly in Edinburgh. Meanwhile, industrials have picked up after keen pricing tempered appetite for the sector and retail is doing well – although there are growing signs of polarisation in that market, with the strong getting stronger and weaker areas going in the opposite direction. Steele said there are “green shoots” in the offices sector, adding: “Volumes were up 38% on 2023 and we would hope to see a rise again in 2025, with more people back in their workplaces and a greater need for diversification among property portfolios. But quality will still very much be the name of the game for some time yet.” See market analytics for Scotland >> Photo © Shutterstock