Industrial rents soar as lack of space presents headache
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Prime industrial rents for units up to 50,000 square feet in size have jumped three times faster year-on-year than the UK average as the lack of building activity forces businesses to compete for available space, according to property consultancy Colliers International.
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Hide AdThe firm found that prices for prime industrial space had risen by an average of 7.7 per cent in the 12 months to July, compared to an increase of just 2.3 per cent for the UK as a whole. It means that the current Scotland average is sitting at £7.59 per square foot – still below the UK average of £8.68, but closing rapidly.
Colliers said the biggest concern was the area around Glasgow, which accounts for much of Scotland’s industrial and logistics needs but is running short of space to accommodate the growth in manufacturing and the retail delivery and distribution sector.
The firm believes that demand for industrial units is being driven by two key factors – the growth of online shopping with the subsequent need for delivery and distribution centres, and the recovery in manufacturing which is now accelerating due to the Brexit-buffeted pound.
Bo Glowacz, senior research analyst, research and forecasting, at Colliers International, said: “Availability has been declining gradually year-on-year in Greater Glasgow to the present 7 million sq ft.
“The overall vacancy levels have also been falling from 10.2 per cent in 2012 to 8 per cent. In terms of quality of the available stock, the vast majority is of poor second-hand quality with only 3 per cent being new and refurbished stock.
“While rental increases have been welcomed by landlords, the Scottish Government’s decision to end 100 per cent rates relief for empty industrial properties last year is likely to restrict speculative [development] going forward, and there are currently no larger buildings planned speculatively in Scotland.
“Indeed, there are virtually no new or nearly new available buildings of between 30,000 and 95,000 sq ft, and just three modern warehouses of over 95,000 sq ft currently available, all within Eurocentral.”
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Glowacz said firms that required large units were likely to have to build their own or have them “built to suit”.
She added: “Occupiers have benefited from competitive pricing over the past decade, but rising build costs and higher environmental standards are also placing cost pressure on required rental levels.
“Moving forward, pricing will need to be at new levels for projects to be viable.”
Iain Davidson, head of Colliers International’s industrial and logistics team in Scotland, added: “The Scottish Government should be seeking to encourage commercial building, not placing barriers in its way such as the abolition of rates relief.”