Edinburgh Remains A Strong Focus For Real Estate

04.09.14

Edinburgh’s wealth of new and existing investment and development opportunities and its drive for economic growth is helping ensure the city remains a strong focus for real estate markets and investors according to the latest Emerging Trends in Real Estate® Europe 2014, a forecast published jointly by the Urban Land Institute (ULI) and PwC.

The report reveals growing confidence within the sector as Europe’s economy strengthens, with risk becoming less of a ‘dirty word’. With the battle for prime assets in Europe’s major real estate markets remaining highly competitive and 60% of respondents believing prime property in core markets are over-priced, investors are increasingly turning to regional cities such as Edinburgh. Recovering markets including Ireland and Spain, secondary property and development opportunities are also being targeted as investors search for returns.

In the latest ranking of 27 cities across Europe, based on respondents’ expectations for market performance in 2014, Edinburgh has remained resilient. Despite competition from recovering markets and political uncertainty around Scottish independence, the city has secured 17th position.

Iain Wintour, real estate specialist at PwC in Scotland commented:

“With the referendum less than eight months away, uncertainty over Scottish independence does not appear to be hindering the city's appeal at present, with many respondents citing Edinburgh’s role as a major European Financial Services centre as a positive factor.

“We are now seeing growing interest from institutional investors in Edinburgh, as well as other major Scottish cities, as they look to widen their nets and escape the high prices being looked for in major capitals such as London. With Edinburgh experiencing increased demand for office space and property development continuing in the Aberdeen market buoyed by the oil and gas sector as well as recent retail property acquisitions and redevelopments across Glasgow, Aberdeen, Dundee and Edinburgh's major retail locations, the prospects for property in Scotland's major cities looks positive for 2014."

Over the last year, Edinburgh has benefitted from notable leasing deals such as Green Investment Bank, Shoosmiths and Skyscanner and more recently Rockstar, as well as PwC’s lease of 32,000 sq ft at Atria One.  Deals are also picking up: in the last few months, fund manager Moorfield purchased Quartermile, one of Scotland’s largest urban regeneration schemes on the site of the former Royal Infirmary, and more activity like this is expected in the coming months.

More ‘adventurous’ investment and development opportunities such as student housing was also flagged up in the report, and in Edinburgh, this is certainly the case with significant developments under way or recently launched across the city from Holyrood Road to Fountainbridge. Retailers are also looking to invest with global brand, Apple, signing a lease for a unit on Princes Street, its first store in Edinburgh.

Paul Halliday, real estate specialist at PwC in Scotland added:

“The 2014 real estate investment market will be dominated by a ‘battle for assets’ as investors look for fresh opportunities in response to intense competition and rising rates, particularly in global gateway cities. While they are increasingly open to a little more risk, we believe investors will continue to focus primarily on sustainable returns from quality assets in good locations.

“A fly in the ointment could be the diminishing availability of Grade A office space with speculative new developments not expected to come online until 2016 at the earliest. We may see some tenants extending leases rather than relocating in the short term, with landlords perhaps investing in refurbishment and redevelopment programmes as they seek to take advantage of this."

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