A PROPERTY investment consultancy is to invest £100 million to create luxury serviced apartments for the corporate market in a move that signals a major shift in residential property investment in Scotland.

Heritor's Consultants, an Edinburgh-based company, which has traditionally bought buy-to-let properties in the central belt on behalf of its private investors, will become one of the largest short-stay letting players in the country virtually overnight.

Heritor's aims to have 200 five-star rated flats located in the upmarket neighbourhoods of Edinburgh and Glasgow by the end of 2007 that will command between £80 and £350 a night from its business and tourist clientele. It is also currently looking at other opportunities to expand on that number.

According to industry observers, the venture is part of a growing movement by residential property investors to generate higher returns from their money following a drop in rental yields from buy-to-let properties.

John Brown, director of consultancy DTZ Residential, said that the dynamics of the buy-to-let market had changed considerably in the last two years prompting investors to look for more lucrative alternatives. "Capital values are doing well but the rental incomes aren't going up," he said. "Moving towards a nightly rental or weekly rental will improve their income margins."

He added that property investment companies did not want to be as reliant on house price growth because there was a belief that the market would slow at the end of 2007 and the beginning of 2008.

He said: "In the last year, I've looked at 10 opportunities around Edinburgh and Glasgow for people who want to do similar ventures."

Chris Buchan, managing director of Heritor's Consultants, said that the short-term letting market in Scotland was a promisingbusinessopportunity. Buchan, who was formerly a lawyer in Hong Kong, admitted that this type of accommodation already existed in Scotland but said there was an under-supply.

Heritor's is keeping its existing portfolio of buy-to-let properties but moving 50 of the 300 flats into its new short-term lets business called Heritor's Residences. The other 150 properties are being generated through a separate joint venture with the Bank of Scotland. That business works with a developer to renovate traditional properties into blocks of luxury apartments and has a pipeline of finished product coming on stream throughout this year.

Buchan said that he wanted to compete against high-end hotels for business travellers staying in the two major cities for short stays but who wanted the privacy and comfort of their own flat. He added that the rise in direct flights to Continental Europe meant that tourists were increasingly looking for short-term apartments.

Heritor's properties will have wireless broadband, flatscreen TVs, daily cleaning and a 24-hour concierge service along with special deals with restaurants, gyms and other services. The first two groups of units will be launched in Edinburgh and Glasgow this week. DJ Alexander, the letting and estate agency, has been retained to let the properties.

Buchan said that he had not abandoned the buy-to-let market, citing a 98.6% occupancy rate in his current portfolio of properties.

But his letting agent David Alexander admitted that the market was no longer viable for some players. "The good old days where there was a shed load of money coming into the market are gone and people are looking at other alternatives due to falling yields," he said.

"If you've got money and look for the right property, then buy-to-let is still a good place to have your money. If you have little or no money and want to borrow money from the bank, you've got a problem."