More real economic data: 37% surge in investment in Scottish commercial property, greater diversity and higher profitability than in the UK



From Insider online business magazine:

‘Investment into Scottish commercial property surged in 2017 as money spread throughout the country and across the office, industrial, retail and leisure sectors. According to figures compiled by Savills, investment reached £2.3bn, 37 per cent ahead of the 10-year annual average of £1.7bn. The figure was boosted by 36 deals worth £20m or more, more than double the number of deals of that size recorded in 2016. And unlike 2016 – when the £1.9bn invested was dominated by forward funding of the Edinburgh St James – last year’s investment was spread across all the major sectors. Savills also noted a “healthy mix” of activity across Scotland.’

Now, I have no reason to suspect Insider of pro-independence sympathies but it’s a fairly regular source of positive indicators for the Scottish economy in amongst a large number of reports which don’t serve that purpose for me, yet I rarely see them reported in the mainstream. I’d have thought Insider and the Scottish Business News Network would regular reads for Douglas Fraser of Revolting Scotland. Is he skipping these reports for some reason? The Insider report also goes on to discuss prime yields’ which seem to suggest that the returns on these property investments are higher in Scotland than elsewhere in the UK:

‘Prime yields in Aberdeen ended 2017 at 6.25 per cent, 100 basis points below the start of the year. Prime yields in Edinburgh and Glasgow both moved in by 25 basis points during the course of 2017 to finish at 5.25 and 5.5 per cent respectively. However, Scottish prime office yields remain attractive compared to the UK regional prime office yield, which currently stands at 4.75 per cent.’

I did of course have to find out a bit more about ‘yields’. Here’s a definition:

‘Yield calculations are worked out by dividing the annual rental income on a property by how much it cost to buy. For example:

Gross yield = annual rental income (weekly rental x 52) / property value x 100.

So, if you buy a retail property for $750,000 and rent it out for $1,500 a week ($78,000 annually) the annual return on your investment, or your yield, will be 10.4%. This is an example of gross yield, where the running expenses of owning a retail business have not been taken into account.’

As for ‘prime yields’, are these a selected subset of a particular kind of property investment such as city-centre offices? I guarantee at least one reader will know.


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