18 Oct 2018
The supply of industrial space in Scotland continues to fall short of strong demand as availability across the UK shrinks to record lows, according to commercial property experts at Colliers International.
Colliers’ Industrial & Logistics Barometer for Q3 2018 shows that, across the UK, high take-up levels mean there is just 1.5 months’ worth of supply of large speculative developments (over 100,000 sq ft) available to meet current market demand. The figures also highlight that in parts of England rental rates are experiencing double-digit growth. While the market in Scotland continues to perform well, rentals have plateaued slightly in the last few months, with large shed rentals remaining static and small sheds rentals decreasing slightly by 1.25%.
Iain Davidson, Director of Industrial & Logistics at Colliers International’s Glasgow office, remains positive and said the market continues to perform well.
“The Scottish industrial market is in good health and we have fortunately seen very little impact resulting from the wider political and Brexit uncertainty. While rental levels have dipped ever so slightly for small sheds and remained stationary for big sheds, it is important to remember that the preceding couple of years have seen record high rentals across Scotland, so we are still in a good place rental-wise.”
As of Q3 2018, supply in Scotland has fallen by 46% since 2010 to the present 15.9m sq ft. Although the vacancy rate has ticked up a little since the end of 2017 to 7.1%, this represents a significant improvement on the 2010 level of 14.6%.
Davidson continued: “In terms of take-up, the Scottish market is strong and we are seeing demand from a number of sectors. Undeterred by Brexit and helped by the weaker Pound, manufacturing companies are seeking space, while the online retail sector, transport, food & drink, and engineering are all fairly acquisitive. We still have some catching up to do, but I believe this year will come close to 2017’s figure of 8m sq ft of industrial take-up.”
The Industrial & Logistics Barometer showed that, UK-wide, availability of industrial space over 100,000 sq ft in size has fallen on average by 71% in the last 10 years. Meanwhile, take up of industrial space over the 100,000 sq ft threshold has continued to rise year on year with 23m sq ft transacted so far this year, up 3.7% on the same period in 2017.
There are signs that speculative development of industrial buildings is picking up, and will result in more space being made available next year. But in Scotland, Mr Davidson says that speculative development remains limited and needs to be addressed.
“In Scotland only 5% of available stock is new or refurbished space. Many of today’s occupier requirements are driven by the desire to take modern, more efficient buildings. The development market, therefore, needs to start bringing forward more schemes, given the current limited development pipeline.”
The Q3 Barometer shows that ‘Retailer & Wholesalers’ continue to represent the largest proportion of deals, accounting for 53 percent (10.6 m sq ft) of transactions completed so far this year, which compares to 43% in the same period last year (Q1 to Q3 2017). Third-party logistics (3PL) and Transportation was the next most active sector, accounting for 24%, followed by Manufacturing at 18%.
Len Rosso, Head of Industrial & Logistics for Colliers International, added: “Brexit and other macro-economic factors are still impacting decision making, but 2019 has 6m sq ft of large scale speculative development scheduled for completion, which should go a long way to address the current imbalance of supply and demand in the UK. Generally speaking, our latest research shows a robust picture, with continued demand for space from retail and 3PL operators driving rental growth.”