Evidence of an upturn in the Scottish office market has emerged in data for the third quarter.
Lismore Real Estate Advisors’ says total transaction volumes reached £440 million across 34 deals, representing a 3% increase on Q3 2024 and sitting 12% above the five-year average.
The office sector led the market, recording £142m in transactions, the largest sector total in Q3 and its strongest performance since Q3 2024.
Standout office transactions included BauMont Real Estate and KZN Real Estate’s £53.85m acquisition of Quartermile 1 in Edinburgh from Epic UK, and Strathclyde Pension Fund’s £19.6 million purchase of Sentinel in Glasgow from Ardstone Capital.
The largest deal of the quarter was US investor, Harbert Management Corporation’s £58.5m acquisition of Martha Street Apartments, a city centre PBSA asset from Chris Stewart Group.
Another noteworthy transaction was Northwood Urban Logistics £26m acquisition of the Malt Portfolio from CedarWood Asset Management, comprising 300,000 sq ft of multi-let industrial trade properties across six multi-let industrial estates located throughout central Scotland.
Chris Thornton, senior associate at Lismore, commented: “Whilst transaction volumes remain subdued, we are seeing clear signs of renewed activity, particularly from core buyers seeking stable income from strong tenants and platform builders consolidating retail parks and industrial assets.
“The deepest demand continues to be for sub-£10 million transactions, where asset management potential or short-to-medium-term reversion opportunities attract private investors, family offices and property companies.”
He added: “Investor appetite is being driven both by those targeting double-digit yields secured against strong covenants and by value-add players pursuing refurbishment opportunities.
“French SCPIs remain active, but pension funds, investment managers and property companies have also re-entered the market, broadening the buyer pool.”
“Macroeconomic challenges remain, but investors are treating them as background noise. After an extended period of caution, the market is beginning to re-engage.
“The office sector’s performance this quarter is a clear signal of renewed appetite, and we expect to see further momentum as pricing and fundamentals align.”
Recent figures from Knight Frank indicated investors moving back into the market in spite of challenging conditions. Retail, hotels and industrials had shown signs of picking up.
Alasdair Steele, head of Scotland commercial at Knight Frank, said investors have accepted that the series of interest rate cuts expected at the turn of the year has not happened.
“At the beginning of 2025, there was a sense of optimism about the state of the economy and a sense that interest rates would be cut significantly by this stage in the year,” he said.
“But after an eventful first half eased over the summer, there is a reality check in the market and a growing realisation that there will be no quick fix to the challenges that were putting a brake on investment decisions.
“As a result, more investors are coming to the conclusion that they have to press ahead with their plans, which has helped activity levels. At the same time, the deep buyer pool for Scottish commercial property has provided support in what is in many ways a challenging market.
“Fewer deals are happening, but the assets that are trading hands tend to be higher quality buildings in prime locations and are attracting a good deal of interest.”
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