The Scottish residential market is buoyant, exhibiting its highest activity levels since 2008. This is despite a chronic lack of supply, with a reduction in new stock coming to market, particularly in Edinburgh. Market activity is strongest in Edinburgh, with the capital accounting for 20% of the value of Scotland’s total sales, and average house prices increasing by 10.2% during 2017. Whilst lack of supply supressed overall transaction rates in 2017, sales of properties over £400,000 in the city rose by 15%, a five year high in central hot spots including Stockbridge. The strongest growth in transactions was in locations close to the city centre, driven by the ongoing improvement in amenities such as the St James Centre redevelopment, and the attractions of city living.
The effect of strong demand and limited supply is reflected in average sales values, with Edinburgh homes being the second highest in the UK. Research suggests even stronger growth over the next five years at 4.1% annually, one of the highest rates for any UK city fuelled by first time buyers and buy to let along with traditional purchasers. Prime central developments such as Quartermile, which is now sold out, and Donaldson School which has attracted substantial off plan sales, are driving prices over £600 per sq ft.
With demand forecasts suggesting that 3,526 new homes will be required annually until 2037, and current new build completions rates averaging 1,750, the imbalance between supply and demand will be a feature of the market for the foreseeable future. In addition to private sales, Edinburgh offers strong markets for build to rent, student residential and the care sector, all of which are competing for city centre development opportunities.Read More
Edinburgh’s office market has seen four years of above average take-up, with more than 1.05 million sq ft of take-up in 2017, the highest since 2001. Keynote deals included State Street Bank (67,000 sq ft), HMRC (191,000 sq ft), Aberdeen Standard Investments (69,000 sq ft), Computershare (40,000 sq ft) and Baillie Gifford (60,000 sq ft), demonstrating the balance of demand from financial services, business, government, and technology.
Office supply is at an historic low level of approximately 4%, with Grade A supply in the city centre at less than 2%. As a result, prime rents have risen to over £34.00 per sq ft per annum, and prime investment yields are at 4.75% and sharpening. The city centre is short of office development opportunities due to strong competition from other uses for the few available sites. Consequently, the office development pipeline will deliver substantially less than the average annual Grade A take-up for the foreseeable future. Office occupiers are therefore increasingly turning to pre-letting space, and focusing their attention on city fringe locations to satisfy their requirements. As Edinburgh’s economy continues to grow aggressively, locations such as New Town North could play a key role in maintaining Edinburgh’s office supply.Read More
Edinburgh is the best performing hotel market outside London, with occupancy levels peaking at 90%, second only to the UK capital and producing one of the highest RevPar performances in the UK. This is driven not only by the strong and extending summer tourist and festivals markets, but also by a consistent level of corporate demand as Edinburgh’s conference appeal continues to increase. In the period between 2016 and 2017, RevPar grew by 12%, having shown 32% growth over the previous 5 years, resulting in prime investment yields for indexed leases at better than 4.00%. As a result, Edinburgh has been identified as the UK’s number one hotel development market in 2017. These key demand drivers and robust trading performance mean that the city is attracting new hotels and brands, with groups already in the city looking to expand. In addition to regular business and tourist hotels, there is also significant demand from new luxury brands. The New W Hotel will be delivered by Starwood Hotels & Resorts Worldwide at St James Quarter, and other luxury brands continue to seek entry into the market. With limited site availability, barriers to market entry are high and demand for new opportunities remains strong. Similarly, the aparthotel and serviced apartment markets remain buoyant, and an essential part of Edinburgh’s accommodation offer.Read More