Fund Activity on the up in Aberdeen

The buoyant North Sea oil and gas industry is fuelling huge demand for property in Aberdeen.    The city now has a severe shortage of stock.  Rental growth and speculative development have become features in the market and we have seen the funds return to share the spoils.  To say the market is busy is an understatement.

In particular, Aberdeen’s office sector has seen many significant investment transactions such as the sales of Denburn House, Custom House and Talisman House with funds dominating the market. A new low yield for a city centre building was achieved with the sale of Grampian House, acquired by Morley Fund Managers at a price of £14.872m reflecting 5.4%.

The west end office district has been quieter, with 2-8a Albyn Place the only sale of note.  Here, a new benchmark yield for the city was set when a local investor paid £5m for the building, a yield of 5.25%. Whilst transactions have been less in the west end, there has been high activity in the development sector with local companies acquiring buildings to refurbish.

The strong market has boosted the city.  Ryden completed £148m of investment transactions in the city last year and has close to £70m under offer this year.  With interest rates rising the future is hard to predict as the yield margin for debt driven investors is now very tight.  There is still good occupational and investor demand for property although the lack of stock is likely to reduce market activity. 2007 may be a quieter year but activity should rise again in 2008, in which several development schemes are scheduled for completion. The Granite City’s thriving economy and strong property market will continue to provide excellent property investment opportunities.

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