Investment into Scottish offices marks a 96% increase on the historic first quarter average volume with £342 million transacted in Q1 2018, according to the latest research from international real estate advisor Savills.

Strong investor demand for Edinburgh against a lack of opportunities sees prices continue to inch up, notes the firm, with prime yields moving in a further 25bps (basis points) to 5% in the first three months of 2018. This sees the gap between Edinburgh investment opportunities, and those in the South, narrow, says Savills, with the Scottish capital now on a par with Leeds and Bristol for the very best space.

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In Aberdeen, 2018 has seen higher levels of office investment during the first quarter (£131 million) than in the previous two years and it marks the strongest year of overseas investment into Aberdeen on record. The headline deal was LCN Capital Partners’ £112.5 million acquisition of Aberdeen International Business Park, representing a 6.9% yield.

In Glasgow where yields are currently 5.5%, Savills says investor demand for prime lots remains strong evidenced by L&G LPI Income Property Fund’s acquisition of 3 Atlantic Quay for £50 million and Hermes acquiring Skypark for an undisclosed sum.

Mark Fleming, director in the investment team at Savills Scotland, comments: “One of the key determinants of yields in Scotland’s office market is the political environment and as a second Independence referendum looks less likely we are in turn seeing ever more investors looking to buy across Edinburgh, Glasgow and Aberdeen. Notably, domestic investors are very much back in the market and actively looking for opportunities. This boost in sentiment has applied a downward pressure on yields of prime assets in Edinburgh, however there remains a 130bps spread between average Scottish office yields on non-prime assets and ‘rest of UK’ average yields, and investors continue to recognise the opportunity to find value in Scotland.”

Strong investment volumes reflect a healthy occupational story, says Savills,  with take up in the first quarter of 2018 totalling 493,000 sq ft in Scotland’s core office markets (Aberdeen wider, Edinburgh city centre, Glasgow city centre), 9% above the five year quarterly average. Savills forecasts core Scotland take up in 2018 will reach 1.8 million sq ft, in line with both the previous five year average and 2017’s level.

Over the next five years, Aberdeen, Edinburgh and Glasgow are forecast to see a combined 3.6% office based employment growth, in line with the national average according to the firm.