Local SMEs drive Edinburgh’s industrial property market demand as costs per square foot rise to £9 across the Capital
Scotland’s industrial property market has built on a solid couple of years with a very strong start to 2017, according to new research from Knight Frank.
The independent real estate consultancy’s latest Logistics and Industrial Commentary (LOGIC) report, covering the first six months of 2017, found strong demand in many areas of the country and a lack of supply pushing up rents. It also reported a 54% increase in investment from the previous six months, up to £88 million from £57 million.
Take-up of units above 50,000 sq. ft. increased to 741,312 sq. ft., a 23% rise on the previous six months. All of the deals in this size bracket were in Glasgow, where limited new-build stock is seeing rents approach £8 per sq. ft. at properties with under 20,000 sq. ft..
Activity in Edinburgh has been concentrated around the sub-5,000 sq. ft. size band, with requirements largely coming from local SMEs and last-mile delivery services. Steady demand, coupled with a lack of suitable, available land, has pushed quoting rents up to £9 per sq. ft.
However, in Aberdeen the sustained low oil price has continued to weigh down on the industrial market. Headline rents have started to fall since the beginning of 2017 and incentives of up to 12 and 18 months are being exchanged for five and 10 year leases, respectively.
Simon Capaldi, Industrial Agency Partner at Knight Frank in Edinburgh, said: “For the most part, Scotland’s industrial market is buoyant. A chronic lack of supply and limited new-build activity are forcing rents upwards in Edinburgh and Glasgow, while Aberdeen continues to grapple with its own well-publicised challenges. Landlords in the Granite City are likely to readjust rents and offer further incentives to secure tenants.
“The Scottish Government’s revised threshold for the Small Business Bonus Scheme has successfully stimulated demand at the smaller end of the market – with more units qualifying for this incentive. From a landlord’s perspective, the overall picture remains very positive: there’s very little new stock coming on-stream and demand is at levels we’ve seldom seen before.”
Jamie Fergusson, Capital Markets Partner at Knight Frank, added: “Investors are chasing industrial property. The growth in e-commerce, coupled with so little new stock, is combining to create a perfect market – the only way for rents to go in the foreseeable future is up. We’ve seen yields sharpen and valuations rise, which reflects the strength of the sector. Although we are almost at the point in the market where speculative development is viable –– there’s little sign of the market topping out.”