“The headline figure for the last six months might not paint the best picture, but the reality on the ground feels a bit more positive” – Alasdair Steele, Knight Frank
Investment in Scottish commercial property fell by almost a fifth in the first six months of 2024 as the Bank of England dithered over interest rates, new figures reveal.
Despite investors pausing for thought in the latter part of the first half, there is some “cautious optimism” as the buyer pool deepens, according to the latest market snapshot from property consultancy Knight Frank.
The firm’s analysis of Real Capital Analytics data found that nearly £750 million was invested in Scottish commercial property assets between January and June of this year. This was down 19 per cent on the £922m in the same period last year and 22 per cent below the five-year average of £954m, but it was more than double 2020’s £447m, when the market was rocked by the pandemic.
![Knight Frank highlighted a number of very recent deals including the sale of Edinburgh’s 40 Torphichen Street.](https://ukpropertyguides.com/wp-content/uploads/2024/07/Why-Scotlands-property-professionals-are-upbeat-despite-miserable-first-half-numbers.jpeg)
![Knight Frank highlighted a number of very recent deals including the sale of Edinburgh’s 40 Torphichen Street.](https://ukpropertyguides.com/wp-content/uploads/2024/02/Peter-Schutzer-Weissmann-head-of-financial-services-management-consultancy-Valentia-Partners.png)
Retail property accounted for the majority of investment by sector type, with a 51 per cent share of the total first-half volume. Hotels made up 19 per cent, while offices and industrials accounted for 16 per cent and 10 per cent respectively.
A breakdown of the data showed that real estate investment trusts (REITs) and listed property companies were the most active buyers, with a 32 per cent share of investment volumes. International investors accounted for a further 30 per cent, while private capital made up 20 per cent, highlighting the increasing diversity of the buyer pool for Scottish commercial property.
Despite the year-on-year fall in investment volumes in the first half, Knight Frank said there had been a recent pick up in activity, with its capital markets team having recently completed on a “flurry of deals” totalling in excess of £100 million. These included the sale of Edinburgh’s 40 Torphichen Street, and in Glasgow the acquisition of 1 West Regent Street and a deal for a large multi-storey car park.
Alasdair Steele, head of Scotland commercial at Knight Frank, said: “At the start of 2024, it looked likely that interest rates would be cut at least once in the first six months of the year and, as a result, we had a much stronger Q1 than 2023. However, a mixed set of inflation figures and economic indicators in the first few months, combined with the calling of the general election, meant many investors paused decision-making during the second quarter to see if a clearer picture would emerge.
“While that uncertainty has slowed transactions, there has still been a relatively healthy level of deal activity and interest – particularly in recent weeks. The headline figure for the last six months might not paint the best picture, but the reality on the ground feels a bit more positive.
“The spread of different types of investors in the last six months is also worth noting,” he added. “Over the last decade, international buyers have come to account for the majority of investment in Scotland, but in the year to date there has been a much more even share, with institutional investors buying as well as selling, alongside increased interest from private equity and property companies. A deeper pool of buyers can only bode well for the remainder of 2024.”
After previously using consultants for the task, Oak Brook has hired its first full-time marketing manager, who will focus mostly on aiding in the promotion of the village’s hotels.
Susan Rose started work Monday, June 10 and will spend 85% of her time on hotel marketing efforts to boost the number of room-nights booked across Oak Brook’s seven hotels. The remainder of her work is allocated to the general positive promotion of the village, including advertising, events, and social media, said Village Manager Greg Summers.
“The Village has twice engaged a professional marketing consultant to provide branding and marketing for the hotels of Oak Brook,” he said. “In both instances, the services received fell short of expectations.”
Summers said a major problem was that Oak Brook’s hotel advertising budget was too large for small firms and too small for large firms.
“As an ‘inbetweener,’ the village’s marketing never seemed to be a priority,” he said. “The hotels were disenfranchised, and the results were subpar. The consultants failed to supply metrics that demonstrated that their efforts had any real return on investment.”
Fortunately, Summers said, with the last selected contractor, Village staff recommended a short, three-month contract as a proving period, rather than an annual, or longer, arrangement.
“Therefore, we were able to terminate services immediately when the Village and Hotel Committee felt our needs were not being met,” he said. “In working with our Hotel Committee, there was a consensus that the only way to enforce true accountability was to have a full-time employee, who was focused solely on Oak Brook and could be in regular contact with all of the stakeholders regularly.”
Summers said the village allocated as much as $500,000 a year to pay its marketing contractors. Those funds came from the Village’s hotel tax, a fund restricted by state statute to promoting the interests of the hotels.
“Having a dedicated team member on staff will cost the Village about one-third of prior expenditures and free up the balance of the hotel funds for direct trackable advertising placement and analytics to determine the success of each placement,” he said.
Summers said Rose brings a strong background as a small business owner and media sales executive who has represented multiple brands and partnered with the tourism and hospitality industry.
“Her skillset includes a focus on destination brand marketing and a deep understanding of both traditional and emerging media,” he said. “She demonstrated her abilities as a creative thinker and problem solver who is comfortable adapting to new ideas, technologies and teams.”
The highest priorities for the new position include effectiveness, accountability, and communication, Summers said.
“Having a dedicated team member fulfilling this role will enhance all three of these positions while having a directly vested interest in communicating with the hotels and delivering results for that constituency, ultimately boosting hotel occupancy rate that supports not only added advertising, but more shopping and dining, which supports the general revenues of the village,” he said.
The 15% of Rose’s work that will be on non-hotel promotion previously was handled internally by employees who were not experts in those respective areas and who had numerous other commitments eroding their time, Summers said.
He said the Village had dozens of applications and interviewed multiple candidates for the new marketing position, before choosing Rose.
“Susan stood out for her local knowledge, prior tourism experience, alignment with village objectives, and her pre-planned approach to understanding the needs of our hotels and ability to quickly act on feedback received,” Summers said.
Rose said she applied for the job because she sees it as a great fit for her skills, and she has loved working in the tourism industry.
“I grew up about 30 minutes away and have many fond memories of visiting Oak Brook with my mother from days shopping or visits to the Graue Mill,” she said.
Rose said she was aware when she applied that this was the first time Oak Brook was hiring someone for its staff to handle hotel marketing.
“I’m excited,” she said. “It’s great to be a part of something brand new. The village team has been very welcoming to me. Oak Brook has a great story to share with tourists and our residents and businesses.”
Chuck Fieldman is a freelance reporter for Pioneer Press.