Lack of new building adds to pressure on rental activity

Property firm DTZ said letting activity in the UK industrial market increased by 800,000sq ft to 6.9 million sq ft in the first quarter of 2011.

The figures were down on the same period a year earlier, but DTZ said availability of "grade A" stock continues to fall as it remains unfeasible for builders to take on speculative developments.

The report noted: "Although the balance of negotiating power remains with tenants, supply constraints are beginning to tip the balance towards landlords."

Peter Fraser, senior surveyor at DTZ in Edinburgh, said: "Occupiers are now entering into build-to-suit projects which will be tailor made for their operations, but will not be available on attractive terms in the same way as those on existing building stock."

He said the principal demand was coming from food chains, discount retailers and internet-based operators, although there was also an "encouraging" number of manufacturing companies in the market. In Scotland, a one million sq ft Amazon deal was the exception to the rule as demand for large distribution units remained limited.

DTZ noted that although transactions, particularly in the manufacturing sector, were still taking place north of the Border, they are not in any significant volume. But limited construction activity has meant availability has still dropped.

Fraser said: "Scotland has experienced a slow start to the year. Amazon's distribution centre in Fife was the high point and potentially could be seen as a catalyst for further similar developments in central Scotland.

"This, together with the Scottish Government's continued emphasis on renewable energy, are the areas that can rejuvenate the Scottish market."