Post-Brexit Edinburgh
In June 1016, a study was released from law firm and real estate consultancy Morton Fraser stating that Edinburgh is the most attractive British location for commercial property investment outside of London. The Scottish capital came out on top of a list of ten cities in the UK in which investors were asked to rank how appealing a prospect each city was.
We are not suggesting that the Brexit vote hasn’t affected the commercial property market in the city, however after an initial adjustment in pricing, activity levels have picked up and deals have continued. Before the vote, Edinburgh’s prime yield of 5.25% offered a discount compared to many other UK cities. This has now increased since the vote.
Three large deals have completed since the vote adding up to a total of £22m. Newbattle Property Group has bought the 96,000 sq ft Eskmills office building in Musselburgh for £7.55m. Westerwood Development Company has bought Shandwick House, a 24,000 sq ft mixed-use office and retail building, for £4.65m and the Edinburgh Park office building has been taken by an undisclosed London-based investment manager for £9.8m.
Kenneth Brewster of Knight Frank said: “It would be naive to suggest that Brexit has had no input on the Edinburgh market but these deals indicate that things are not as bad as some feared and that the market is holding up well, following an initial adjustment in pricing.”
Douglas Binnie, senior surveyor in the Glasgow capital markets team at Knight Frank says that he feels comfortable in Edinburgh currently as “investors can rely on a steady rental growth.” On the other hand, the lack of space and high rents are worrying for potential occupiers. There are only six buildings of grade-A office space that accommodate requirements in excess of 25,000 sq ft which means a larger occupier has limited choice. According to Bilfinger GVA, there are a number of new-build office schemes underway but they are unlikely to satisfy occupier requirements.
More development in Edinburgh is likely but office refurbishment is proving increasingly attractive. An example is the UK Commercial Property Trust-owned office at 81 George Street. The trust is pushing ahead with a planned refurbishment of the building, and is already securing pre-lets on the revamped space.
Agents are predicting consistent rental growth at the top end of the market over the next 2 years. “The level of demand in the city gives you a lot of confidence,” says Knight Frank’s Withall.
