SCOTLAND has attracted more than £500 million of international capital in the first half of 2019, according to Savills.

The latest research by the international real estate advisor shows that 2019 is now on track to become the best ever recorded year for inward investment in commercial real estate in the country.

Some £575 million of international capital was invested in Scottish commercial property in the first half of 2019, accounting for 49% of all investment in the period and representing the largest share of inward capital since 2016.

Investors from Asia accounted for the largest proportion, channelling more than £240m into Scotland in 2019, surpassing the £180m invested in the whole of 2018. South Korean investors spent more than £200m, investing in some of the largest deals in Scotland. Leonardo Innovation Hub was sold to South Korean investors for £100m, with a 5.9% yield.

European investors also continued to spend heavily on Scottish commercial real estate, with almost £200m invested in the first half of 2019. The largest deal this year was to German investors, who bought 4-8 St Andrew’s Square in Edinburgh for £120m, representing a yield of 4.45%.

Head of Savills Scotland Nick Penny said the country’s attractiveness to investors is likely to increase further. “2019 is shaping up to be a record year for inward investment into Scotland,” he said. “Investors are attracted by the strong performance of the economy, record employment and more attractive yields on offer relative to other regional cities in the south east.”

“Recent plans set out by the Government to position Scotland as a forward-looking digital nation by embracing 5G has the potential to enhance Scotland’s global competitiveness and continue to drive inward investment. We are already experiencing a growth in the tech sector, particularly in Edinburgh, and with digital becoming more engrained in business processes and procedures, having a fast and reliable digital infrastructure will become increasingly vital for businesses.”

Overseas investors accounted for more than three quarters (79%) of investment, according to the latest data from Savills. The second quarter was particularly active as more than £400m of deals were completed, four times the amount in the first quarter.

Offices proved to be the most popular sector in the first half of the year with £494m transacted.

Overall, Edinburgh witnessed the highest level of investment in Scotland. A total of £316m in investment was generated through six deals, compared with five in the first half of 2018.

Glasgow and Aberdeen achieved £128m and £50m of office investment respectively. Key deals during H1 included 110 St Vincent Street, Glasgow. Savills sold the site for £48m, reflecting a 5.4% yield. Meanwhile, AB1 on Huntly Street, Aberdeen, was purchased for £13.5m, with an 8% yield, also advised by Savills.

Penny, concluded: “The fundamentals of the office market remain strong. Edinburgh is proving particularly popular due to the combination of a robust occupational market and restricted supply of high quality office space which has led to rental growth in the city. This environment is creating significant demand for office buildings with international investors that want to secure long-term income at attractive yields.”