Real Estate: A Scotland Overview

Scotland Real Estate Market Overview

The Scottish real estate market continues to be active and generally resilient despite UK economic uncertainty and legislative changes. As we head into 2026, property professionals and their clients face a landscape shaped by shifting investment patterns, presenting both challenges and opportunities for market participants.

Economic Conditions and Market Activity

The commercial real estate sector continues to present a varied picture. Traditional office space still faces challenges from hybrid working patterns (with leisure and retail knock-ons) while industrial and logistics properties remain in strong demand, in part, driven by continued e-commerce growth. This said, there are signs of prime retail confidence with new openings of stores such as Uniqlo and the Laings flagship store in Glasgow city centre.

Despite the much-heralded tourist tax, which is due to commence in 2027, we have seen activity in the hotel development sector with two significant hotel openings in Glasgow, notably the Student Hotel and the AC Hotel by Marriott. Interestingly, both form part of larger schemes that include student accommodation elements, which may be what is needed to make the numbers work in the current economic environment.

This anecdotal transactional momentum is reflected in the Registers of Scotland statistics, which show 7% and 6% increases in commercial sales and commercial leases respectively in 2024/2025 compared with the previous year (Registers of Scotland: https://www.ros.gov.uk/data-and-statistics/property-market-statistics/property-market-report-2024-25).

Investment volumes in Scottish commercial property totalled approximately GBP1.4 billion to November 2025, with investors expecting activity to rise in 2026 (Colliers: https://www.colliers.com/en-gb/research/scotland-property-market-snapshot-november-2025#:~:text=Unemployment%20dropped%20to%203.7%25%2C%20and,hotel%20yields%20rose%207%20bps).

Legislative Developments

The regulatory environment continues to evolve. The much-debated Heat in Buildings Bill (delayed until after the next election) continues to inject uncertainty as to energy efficiency requirements. The Bill aims to establish a pathway towards net-zero emissions in Scotland's buildings by 2045, with the possible introduction of minimum energy performance standards. This change will closer align Scotland with the English Minimum Energy Efficiency Standards (MEES) legislation, where we have seen investment in sub-standard buildings fall off a cliff and a huge drive in investment in retrofitting and sustainable construction.

The Scottish government's ongoing reforms to the private rented sector have introduced additional complexity for landlords and investors. Enhanced tenant protections, rent control mechanisms and strengthened enforcement powers for local authorities have altered the appeal of investing in the private rented sector. These measures have contributed to a decline in the private rented sector supply, with some landlords exiting the market, whilst simultaneously creating opportunities for institutional investors with longer-term aims and professional management capabilities.

The Moveable Transactions (Scotland) Act 2023 represents the most significant modernisation of Scotland's secured lending framework in recent years. The Act introduces a statutory register for security interests over moveable property, replacing the complex common law system of assignation. This reform enhances Scotland’s competitiveness as a lending jurisdiction by providing greater certainty and transparency for lenders. The Act aligns Scotland with international best practice, potentially making Scotland more attractive to lenders. We are seeing many non-traditional lenders dipping their toes into the Scottish lending market and this seems likely to accelerate following the introduction of the Act.

Challenges Facing Market Participants

Despite the recent legislative modernisations, financing conditions represent a primary challenge across all property sectors. The sustained period of elevated interest rates has increased debt servicing costs. Lenders have adopted more stringent underwriting criteria, with particular scrutiny applied to development finance. Borrowers are increasingly exploring alternative funding structures and we have seen a particular increase in bridge funding.

Construction costs, labour shortages, and supply chain disruptions have compressed development margins, leading to project delays and, in some cases, cancellations. Developers are responding through value engineering, phased delivery strategies, and enhanced risk allocation in construction contracts.

Opportunities and Strategic Responses

Despite these challenges, significant opportunities exist for well-positioned market participants. The transition to net-zero presents substantial investment opportunities in energy efficiency, renewable energy infrastructure, and sustainable development. We have seen huge investment in renewable energy projects and EV charging points, as the market is flooded with new participants capitalising on the net-zero wave.  

The build-to-rent sector continues to expand, with institutional investors attracted by Scotland’s strong rental market, particularly in Edinburgh, Glasgow, and Aberdeen. Purpose-built student accommodation remains resilient (after a pause) supported by Scotland’s robust higher education sector and international student demand.

Alternative sectors, including life sciences facilities, data centres, and healthcare real estate, are attracting increased attention as investors seek assets with long-term demand. Scotland’s strengths in research and innovation, particularly in the life sciences and renewable energy sectors, underpin these investment themes.

The adoption of AI and legal technology is also helping to reshape how legal services are delivered in the Scottish real estate sector. AI-powered due diligence platforms, automated document review systems, and predictive large language model (LLM) analytics tools are enhancing efficiency and reducing transaction timelines. For clients, these technologies offer the potential for faster, more efficient transactions and improved risk identification. Legal practitioners are increasingly leveraging these tools to provide more strategic, value-added advice whilst maintaining the professional judgment and client relationships that remain central to complex transactions. The integration of AI into conveyancing, lease analysis, and portfolio management is expected to accelerate, creating competitive advantages for firms and clients who embrace these innovations.

Outlook

The Scottish real estate market is navigating a period of adjustment and transformation. Scotland’s economic diversity, skilled workforce and commitment to sustainable development position the Scotland favourably for investment. It is, however, crucial that any legislative changes act to enhance investment appeal. Those players who can navigate the regulatory complexity, access appropriate financing, and align their strategies with Scotland’s economic and environmental priorities will be well-positioned to capitalise on the opportunities that emerge as the market evolves through 2026 and beyond.