The latest data from Knight Frank reveals that investment in Scottish commercial property surpassed £300 million in the first quarter of 2025, reflecting a somewhat subdued entry into the year. With only £315 million in transactions from January to March, this figure falls significantly short of the five-year average of £475 million for the same period. The decline is attributed to investors grappling with an uneasy macroeconomic and geopolitical landscape.
Interestingly, when examining the statistics, it’s clear that the standout first quarter of 2022, which saw a remarkable £900 million in transactions as pandemic-related deals closed, skews the median since Q1 2021. Excluding that exceptional figure, the average investment over the past four years sits at £369 million.
Within the investment landscape, the office sector captured 36% of total deals valued at £112 million, marking its strongest representation since 2021. This resurgence suggests a renewed confidence in office spaces, which had faced significant challenges in recent years. Meanwhile, the retail sector closely followed, making up 35% of the market at £109 million, while hotels accounted for the remaining 24% with £76 million in transactions.
Notably, private investors emerged as the predominant buyers in the Scottish commercial property market, contributing to 42% of the total investment volumes. International buyers represented 37%, while real estate investment trusts (REITs) and listed property companies made up 18%.
Alasdair Steele, the head of Scotland commercial at Knight Frank, noted, “The market has been resilient, but the strong news flow early this year has understandably influenced investor decision-making.” He anticipates that the uncertain backdrop may extend into the second quarter, potentially resulting in further challenges ahead.
Despite these hurdles, Mr. Steele highlighted some positive trends. The increased interest in office properties signals that recovery efforts observed in the previous year may be solidifying. Additionally, the active involvement of private investors indicates a vibrant pool of buyers beyond the predominance of international investors seen in the late 2010s.
The recent fluctuations in equity markets also highlight the ongoing appeal of commercial property as a stable alternative investment. The UK, in particular, is perceived as a relative safe haven amid current uncertainties. In this context, Scotland distinguishes itself by offering better value compared to many other UK regions, particularly given its alignment with several growth sectors such as the energy transition. This presents a favorable outlook for long-term investment in purpose-built student accommodation (PBSA), emphasizing the state’s potential as a lucrative market for investors willing to navigate the complexities of the current economic climate.