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CoStar Analysis: Glasgow office investment breaks records in Q1 2018

By Grant Lonsdale - Thursday, May 10, 2018 14:54

A string of landmark investment deals helped Glasgow’s office market get off to a flying start in 2018, according to CoStar’s latest data.

Property investors ploughed more than £300m into the city’s office market in Q1 2018, eclipsing the previous quarterly record by 20% and marking a three-fold increase on the five-year quarterly average. This brought the total invested over the last four quarters to more than £700m, the highest annual total ever recorded. Glasgow was also the most heavily invested in Big Six city in Q1 2018, with quarterly CBD investment volumes surpassing Manchester’s for the first time in five years.

UK institutional investors were behind the market’s three largest transactions, representing a marked turnaround from 2017 when overseas buyers dominated. The standout deal was Legal & General’s forward-funding of Building 1 at Atlantic Square for a price thought to be in excess of £100m, one of the market’s largest ever single-asset office investment transactions.

The insurance and pensions giant also acquired Atlantic Quay 3 from Moorfield for around £50m, reflecting a net initial yield of less than 3.75% (one of the lowest yields ever paid for an office asset in Glasgow). Both buildings are let to government covenants on 25-year leases.

Other key deals included Hermes Investment Management’s purchase of the multi-let Skypark complex from Lone Star for circa £78m (an 8.3% yield), and Mirae Asset Global Investments’ acquisition of 122 Waterloo Street from HFD for more than £65m (a 5.6% yield). The latter is let to Morgan Stanley for a period of 15 years and will serve as its global transaction centre. The deal is otherwise noteworthy for being the first purchase of an office asset in Scotland by a South Korean investor.

CoStar’s latest Glasgow office report can be found here and our Q1 2018 UK investment report can be found here.

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