North Esplande West


In 2020, we started the year with optimism backed by improved investor sentiment towards the key property markets of offices and industrial. While this was not expected to bring about a complete return to the highs of 2012-2014, it was becoming more widely recognised that the city offered favourable value when compared against the shrinking returns in competing UK regional cities. Obviously, few predicted what would happen next. An oil price crash, complete shutdown of the property markets during the first lockdown and restrictions of some form for the remainder of the year. All of this had a profound effect and the result was investment volumes for office and industrial transactions dropping to an all-time low. How will it recover? Will it recover? We are posed with the same questions that have grown all too familiar, but this time there are possible silver linings.

2020: A REVIEW

Investment volumes for the office and industrial sectors in Aberdeen totalled a combined £19m, compared on a like for like basis against £185m in 2019 and £206m in 2018. All bar one of the transactions (E7 Aberdeen Gateway) were sold or marketed prior to the first lockdown with some requiring re-negotiation or delayed completions. Other stock was brought onto the market in Q1 2020, but most were subsequently withdrawn when Covid-19 caused the first lockdown with viewings and surveys unable to take place. The largest investment which remained on the market was 16 North Esplanade West, let to Neptune Energy with c.9 years unexpired term, which is now currently under offer.

The largest transaction of last year was Urban Logistics REIT PLC’s purchase of 25 Wellheads Terrace, comprising a 62,810 sq ft industrial unit let to Iron Mountain on a recently agreed 10-year (with five-year tenant only break option) lease extension.

The average industrial yield last year was 9.92%. The notably keener yield paid for E7 Aberdeen Gateway (which was let to ERIKS with unexpired term of 11 years) was demonstrable of the continued demand for assets which benefit from; strong covenants, long unexpired terms (10 year +), high-quality buildings and prime locations. In fact, demand for property investments with this type of profile are arguably set to increase due to the prolonged low interest rate environment.

Largest Transactions

(Beige indicates KF involvement)


Aberdeen is familiar with hard knocks; it’s been here before. The public and private sector industries and the city’s people are known for their resilience. The events of the past year have also accelerated several trends and in the North East none more so than the push to a renewables-based future. With Aberdeen being home to the skills, expertise, onshore and offshore infrastructure, it should be extremely well placed to capitalise on this accelerated movement. While this fundamental change in the local economy takes shape, we will of course see the impact of the pandemic continue to have consequences for the North East commercial property markets. In the short to medium term we envisage:

  • Yields to move outwards on most industrial and office stock. The exception will be for those buildings that are high quality let to strong covenants on long leases, which we expect continued demand at all lot size levels.
  • We are already seeing yields sharpen greatly for assets let to those sectors which have performed strongly during the pandemic namely; food retail and logistic distribution.
  • A further yield differential will emerge between buildings which have strong green credentials and/or let to tenants involved heavily in renewables compared to those that are not.

CUT House, Aberdeen