Edinburgh moves up Euro property index

PwC’s latest Emerging Trends in Real Estate Europe report said that investor sentiment in Edinburgh returned in 2015 following uncertainty created by the independence referendum which led to Edinburgh dropping two places.

According to the report, published jointly by the Urban Land Institute (ULI) and PwC, last year’s drop was mainly due to political uncertainty in the lead up to and immediately following the September Referendum.

Dublin (3) and Birmingham (6) are the only cities outside mainland Europe to feature in the top 10.

Based on respondents’ expectations for market performance in 2015, ETRE notes that a strong uplift in real estate investment in Edinburgh during 2016 is anticipated, placing it ahead of similar activity in competitor cities of Barcelona, Rome and Frankfurt.

Boosting capital values, much of this is expected to come via commercial and retail investment, with hotel and tourist trades also doing well. One example of this is the 40,000 square foot, St James mixed-use scheme, with developers seeking funding in the region of £850 million.

However, as delegates attending the report launch at PwC’s Edinburgh office this week heard challenges still abound: some of those surveyed believe the devolution question hasn’t totally disappeared, which could give rise to concern around longer-term, large scale investments.

Susannah Simpson, tax partner, PwC in Scotland, said: “It’s clear that for both domestic and international investors, real estate in well-run major cities, displaying good local government remains a fertile hunting ground ‐ and this is great news for Edinburgh, as well as other Scottish cities.

“Over the last 12 months, demand for Grade A office accommodation across both Edinburgh andGlasgow city centres has continued to enjoy a renaissance. As prime assets are snapped up, we expect to increasingly see a ripple effect towards the peripheries, for example, in West Edinburgh which now benefits from enhanced transport connections following the launch of the tram network and, in due course, when the second Forth Crossing comes on line.

“The office market in Aberdeen has its own challenges to bear, as low oil prices now enter a second year with no sign of let up. It continues to be heavily influenced by the woes of the oil and gas industry as it strives to successfully navigate this lower for longer climate.

“However, new centres like Dundee stand to benefit from a wall of money looking for a home in commercial property investment and, attracted by the entrepreneurialism and growth expectations, from the new creative industries and digital and life science sectors.

“Overall, investors and developers appear bullish about prospects for 2016, as a result of a combination of low interest rates in the UK, a competitive offering with the European marketplace and the availability of capital.

“Market uncertainties caused by ongoing debates over devolution/independence and changes in tax law which penalise investors in the buy-to-let market may dampen that bull market. However, taking advantage of the current wall of capital whilst continuing to focus on underlying market fundamentals, active asset management and operational skills should continue to reap dividends.”