Whilst this overall fall can be attributed to ongoing economic uncertainty, H2 saw a marked improvement on the first half of the year and a significant increase of 39% when compared to H2 2022.

Despite a national decline in retail investment, the asset class saw transactions totalling £714 million in Scotland, more than 50% up on offices at £357m. This was followed by industrial, leisure and alternatives at £172m, £144m and £105m respectively.

The retail sector’s popularity in Scotland is largely due to the strength of the occupational market. This is especially true in popular destinations such as Buchanan Street in Glasgow and George Street in Edinburgh, which have weathered the storm seen during the pandemic well and remains attractive given continued rental growth as a result of a lack of supply. As one of the first sectors to suffer during Covid-19, pricing has since corrected, affording investors a degree of certainty not yet achieved in other asset classes.

In terms of buyer type, overseas investors were the most active for a second year running, accounting for almost 46% of all transactions at £680m. However, this was a considerable decline on 2022, which saw £1.025bn of foreign money spent on Scottish commercial property. Although, Savills notes that this drop comes as no surprise, given recent macro global events. Property companies (£342m), private investors (£187m) and UK institutions (£127m), also remained active in the market.

Key deals across all asset types included the sale by Savills of Craigleith Retail Park in Edinburgh to Realty Income Corporation for over £60m and Livingston Shopping Centre in West Lothian to LCP and Evolve Estates, part of M Core, for £45m. The acquisition of 191 West George Street, Glasgow by French investor, Corum, for £36.4m and the sale of the Waldorf Astoria hotel in Edinburgh to Henderson Park for £82m.

Looking ahead to 2024, Savills anticipates that Scottish commercial real estate will remain appealing to many investors. As pricing continues to adjust to the new market paradigm, which it has done comparatively quickly compared to many other international markets, this will provide the opportunity to deliver very attractive income returns.

Aly Wright, director in the Scottish investment team at Savills, said: “As we know the investment market across the UK has been impacted by ongoing uncertainty, with pricing yet to find its footing. However, Scottish investment figures have remained relatively robust at only 27% below the 10-year average.

“What is also interesting to note is the type of asset investors are buying, with retail investment in Scotland seeing the highest level of transactions since 2016.

“Although we continue to see uncertainty in the office sector, given the drive to repurpose obsolete stock, the investment rationale for up and built, well located product will become increasingly compelling moving forward, compounded by an extremely limited development pipeline across Scotland’s main centres.

“All things considered, 2023 was a relatively positive year, and whilst we anticipate a slow first quarter of 2024, we are positive this will pick-up post Easter as markets continue to stabilise.”