As London office prices rise, investors are eyeing Scotland.

 

According to a new survey, commercial investors in the United Kingdom are turning to outlying cities like Glasgow and Edinburgh as London office prices rise. flats for sale in qatar

According to Deloitte Real Estate, investors are rapidly priced out of the London real estate market, where rent prices are projected to rise by 10% in the West End this year.

Instead, investors are looking north to Scotland, where Edinburgh and Glasgow have forecasted rental growth of 7% and 5%, respectively, according to Deloitte.

According to Deloitte reports, Edinburgh's performance in 2012 was the best in four years, with rent in the capital remaining healthy.

"Although the degree of market recovery we can expect across Scotland this year is limited, it is the most optimistic image we have been able to paint for the area in some time," said Alasdair Ramsay, head of Deloitte Real Estate.

The demand for Grade A space in Glasgow has risen, resulting in increased construction activity. According to BBC News, the city's expenditure volumes increased year over year. The selling of One George Square accounted for a large portion of the £152 million in deals done in the area.

Glasgow is planning two city centres, the city's first major projects in many years.

Mr. Ramsay said, "Glasgow is one of the first regions outside of London to see any new construction activity, providing some ground for hope for the next 12 months."

Despite the fact that Edinburgh has no new proposals in the works, an improvement in rental growth is seen as promising.

"By this time next year, we might be looking at an even more positive sight," Mr. Ramsay predicted.

 

Malaysians are flocking to London to invest.

Malaysian investors are increasingly interested in office space in London. According to Jones Lang LaSalle records, Malaysian funds have invested $3.7 billion in London office buildings since the beginning of 2010.

In the last three years, the United Kingdom accounted for 62 percent of the Southeast Asian nation's overseas commercial property investments. Malaysian investments in China were a distant second, with $604 million invested over the same time span.

The Malaysian funds concentrated almost exclusively on office buildings in London, with $3.7 billion of the $3.8 billion in commercial investments going to the city. According to JLL, the funds favored buildings with tenants that occupied half or more of the space and had long-term leases.

"From an institutional standpoint, the most important thing for them is to have tenants that are easy to handle and stable - it's like buying a government bond," said Chris Hahn, director of Asia-Pacific Capital Markets for Jones Lang LaSalle Singapore.

According to the Wall Street Journal, state-backed funds such as the Employees Provident Fund, pension fund KWAP, asset manager Permodalan, and the Moslem pilgrims' fund Tabung Haji were the largest Malaysian investors in the United Kingdom.

Despite concerns about the London market's long-term resilience, Malaysian interest appears to be growing. According to the Star, KWAP paid £200 million for the office skyscraper 88 Wood Street, London EC2, which is occupied by Mitsubishi, Hewlett Packard, Collins Stewart, and National Australia Bank.

Lembaga Tabung Haji bought 151 Buckingham Place for £205 million last month, giving the fund a yield of almost 7%, according to the report. The Department of Health and its oversight agency are housed in the government building.

According to the Wall Street Journal, the emigration of Malaysian funds could be masking a larger problem at home, such as an oversupply of office space and falling rents.

Three-year tenant occupancy is the norm in Malaysia.

"That's very high-risk for institutional investors," Mr. Hahn said of the short tenancy term. Markets like the United Kingdom, on the other hand, where occupancy cycles usually last a decade, are a more appealing investment.