The biggest deal was the £100m sale of the W Hotel at Edinburgh’s St James Quarter by Nuveen to Schroders, followed by Sovereign Centros’ £54.44m disposal of St Enoch Shopping Centre in Glasgow to Praxis. Minus these transactions it was another muted quarter for the market, though sentiment towards the logistics sector remains broadly optimistic and there are signs of renewed buyer interest elsewhere.
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Lismore said the sale of W Hotel underscored the continuing outperformance of Edinburgh’s hotel market, which remains buoyed by strong tourism and business travel. High occupancy levels in the region of 85% and double-digit revenue growth are driving investor appetite for increasingly scarce hotel redevelopment opportunities in the Scottish capital.
“The high street retail sector is also regaining momentum, with investor focus broadening beyond Buchanan and George Street to the best parts of Princes and Argyle Street, supported by limited supply and rental growth,” said Chrissie Clancy, investment surveyor at Lismore.
Writing in Lismore’s quarterly market review, Valentine Beresford and Hugh Chivers of real estate investment trust LondonMetric said logistics remains a favourite.
“Logistics continues to be our preferred sector, driven by strong demand and chronic supply constraints,” they said. “While rising debt costs and limited stock present challenges, they’re market-wide, not sector-specific.
“The biggest issue now is the lack of investable opportunities, with strong competition when assets do come to market.”
More than half of property investors surveyed by Lismore, 56%, expect to be net buyers in logistics in the second half of this year while just 10% anticipating they will be net sellers. Appetite is strongest among institutional funds, with 71% identified as net buyers, while investment managers and property companies also indicated positive momentum.
However, limited availability of high-quality stock was a recurring theme, with many saying their ability to transact will depend on suitable opportunities coming to market.
The survey also points to stabilising yield expectations, with 53% of respondents predicting prime logistics yields will remain steady and 38% expecting yields to harden, buoyed by the prospect of interest rate cuts later this year.
When asked about key drivers of logistics investment, occupational demand (29%) and rental growth (26%) topped the list, reflecting a continued focus on income resilience and market fundamentals. Liquidity, minimal void risk and yield compression potential were also cited, alongside qualitative feedback emphasising capital deployment needs, low obsolescence risk and sector stability.
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Looking at the wider market, Ms Clancy noted early signs of renewed activity in Glasgow where offices are attracting increasing interest with five deals currently under offer.
This should improve the volume statistics and give some impetus to the market going into the second half of the year following a particularly quiet start to 2025. Although trading is at an “attractive discount” to historic levels, Ms Clancy noted that the pool of buyers appears to be deepening.
French investment collectives known as SCPIs also remain active, and are now expanding their interest beyond the central belt to include Aberdeen for well-let, high-yielding assets.
“As income becomes the primary driver of returns, asset management-focused investors are well placed, while sub-£10m lots remain highly liquid among private, often debt-free, buyers,” Ms Clancy said.
She added: “The UK macroeconomic outlook offers cautious optimism; with inflation softening and interest rate cuts likely in the second half, investor sentiment may begin to turn a corner.
“With a number of significant deals expected to conclude in the months ahead, we anticipate a meaningful uplift in activity during H2 2025.”