Colliers releases latest Scottish industrial property market snapshot
PRESSURE on supply and strong occupier demand meant that rents in industrial warehouses continued to increase in Scotland by an average of 2.4 per cent last year. Despite the headwind pressures on the UK economy the global commercial real estate firm expects that rents will continue to rise in 2023, albeit at a slower pace.
Take-up in Scotland for all sizes reached 5.4m sq ft in 2022, down 13.8% y/y, while availability across all grades and sizes stood at 8.7m sq ft in Q4 2022, down 5.9% q/q but 10% higher y/y. This level of supply equates to a vacancy rate of 3.6% and it is down from the five-year average of 4.1%. Average rents across warehouse sizes and regions increased 2.4% y/y in 2022 (MSCI).
Looking at take-up in West Scotland specifically, 3.1m sq ft of warehousing space transacted last year, almost in line with the five-year average, leaving only 3m sq ft of supply on the market, 21 per cent below the five-year average. Land values in the region reduced by 16 per cent to 250,000 per acre from six months prior, while average prime rents for 50,000+ sq ft units rose by 50p to £8.50psf.
Iain Davidson, director in Colliers’ Glasgow office said: “The Scottish industrial occupational market remains strong, and is only hampered by a lack of available stock. From a mid-large box perspective, distribution firms have returned as the top sector by demand, but it’s not all about logistics occupiers as warehouses continue to appeal to other business sectors. For example, last year we advised on Scotland’s largest deal; a 552,500 sq ft pre-let to Harper Collins at Nova Business Park, Glasgow on behalf of Tritax Symmetry.”
In East Scotland where supply is even more scarce with only 1.3m sq ft now remaining, take-up in 2022 was 922,000 sq ft. Land values also reduced by 23 per cent to £500,000 per acre, while rents increased across all warehouse sizes, with prime rents now £12.50 psf (up to 15,000 sq ft).
Lewis Pentland, director in Colliers’ Edinburgh office said: “There remains a supply shortage across all warehouse sizes and grades which will continue to result in rental growth in 2023. This is likely to be strong in refurbished and second-hand stock, particularly in the east of the country where voids are at historical lows, and there’s a lack of development in the pipeline.”
Iain added: “Although the occupational story remains positive, developers are battling with build cost inflation and softening investment yields which means that many speculative developments have been paused. However inflationary pressures are expected to ebb away this year, and we’ve seen that when new builds do come on stream they are letting well at impressive rental levels.”
