Outlook for investment in Scottish commercial property market positive
With talk of another referendum in Scotland if the UK votes later this month to leave the European Union new research has found that Scottish independence is not a priority for UK property investment.
Investors believe that they will still invest in commercial real estate in Scotland as long as yield outperforms other regions as the issue of Scottish independence ranks lower in importance than rental yield, capital growth and a stable tax environment.
Just 21% of property investors said independence was an important factor, less than half the 46% who mentioned rental yield, according to the Morton Fraser survey.
Overall one in four property investors is open to investing in Scotland with 11% actively monitoring or currently pursuing opportunities. Proportionately, this is above the nation’s 8.9% share of the UK commercial real estate market.
It also shows that 85% believe that leaving the EU would have no impact at all on their likelihood to invest in Scotland and 79% of property investors claimed Scotland separating from the UK would not affect their decision to invest.
‘It is easy to overestimate the potential impact of Scottish independence on the property market. Investors are ready to enter the market if the right opportunity arises, regardless of the political status of the country,’ said David Stewart, commercial real estate partner at Morton Fraser.
‘That gives us optimism for the future of the Scottish real estate industry. If the price is right and the market conditions are at least on a par with other regional areas across the UK, investors will follow the returns. The prospect of a neverendum in Scotland may drag investment, but it’s not the deciding factor for many,’ he added.
With rental yield the number one criteria for potential British property investors looking to enter the Scottish market, Morton Fraser has uncovered the ‘tipping point’ at which a yield premium would encourage investment.
Of the property investors likely to invest in Scotland if there was a higher yield premium, 70% said a benchmark of more than 3% or higher would encourage them to invest, with 31% saying more that 5%. That figure should be viewed in the broader context of many respondents being initially cold on investing in Scotland, so the true figure for active investors is likely to be sharper.
‘Many investors are prepared to overlook ideological or political issues to run the rule over Scottish property investments. The yield gap between Scotland and other regional cities in the rest of the UK can always be met with a quality opportunity whether you are looking to invest in Edinburgh or Manchester, Glasgow or Bristol, a high quality asset will always stand on its own merits,’ Stewart added.