Scottish industrial property market due to bounce after uncertain 2019

27 02 20 industrial and logistics

Experts at Colliers International say strong underlying demand will re-appear in 2020


Transactions of Scottish industrial property should bounce back this year as demand pent up during an uncertain 2019 reasserts itself, Colliers International predicts.

The firm’s Annual Scottish Industrial Trend Tracker recorded 17% growth in floor space transactions across Greater Glasgow in 2019, but at 3.2 million square feet the total was still 7% below the five-year average. In the East, volumes were 4% lower year on year, at 1m sq ft.

Scotland as a whole saw take-up of 5.2m sq ft in 2019, which reflected a slight reduction of 3.2% on 2018’s activity of 5.4m sq ft. Compared to the five-year average, it was down 10.2%. 

However, Iain Davidson, Director of Industrial & Logistics at Colliers International’s Glasgow office, said suppressed demand should ensure a bounce in 2020.

“In a supply-constrained environment, Brexit uncertainty and a lack of Grade A stock impacted activity in 2019. The Scottish market will see a pick-up in demand and transaction levels in 2020,” he said. “While those figures seem to suggest a loss of occupier appetite, which there definitely was due to Brexit uncertainty, the lack of available stock has also been a key factor in this slower performance. There are a number of unsatisfied requirements due to dearth of suitable buildings.”

The last few years have seen steady rental growth across all size bands as demand outstripped supply. Prime rents in 2019 remained stable in the West of Scotland. However, Davidson expects that robust demand, limited supply and deals on new product will contribute to support upward pressure on rents this year.

In terms of development pipeline, Colliers estimate that just over 400,000 sq ft is currently planned over the next 12-18 months on a speculative basis across the whole of Greater Glasgow. “Put into context, this represents only 1.5 months’ take-up, based on the five-year take-up average of 3.2m sq ft. While welcome, this is insufficient to meet demand in the short-medium term,” said Davidson.

Going forward Colliers expect to see larger requirements being primarily satisfied on a Build to Suit basis. 

Davidson commented: “Take-up doesn’t justify speculatively developing 50,000 sq ft plus buildings to any great extent. Moreover, these larger requirements are becoming more bespoke in terms of design, specification and low site coverage, something that the development market would be unwise to second-guess on a speculative basis”.

In the East of Scotland, activity at the larger end of the market was dominated by sales, with purchasers taking advantage of favourable pricing. Sectorally, demand largely reflected trends in the West.

Lewis Pentland
, Associate Director at Colliers’ Edinburgh office, said: “Despite the slight drop in take-up last year, we recorded more enquiries in 2019 than we did the year before. Given the time lag from enquiry to done deal, we anticipate this having a positive impact on 2020 take-up.

The bias seems to have been for good quality refurbished space. The question is whether there will be a sufficient supply of quality stock to cater for demand, and the impact of Brexit.”

 

 


Related Experts

Iain Davidson

Director

Glasgow

Iain has a wealth of experience in the Scottish commercial property market, specialising in Industrial and Logistics real estate. He is in an expert in providing acquisition, disposal, development and general agency advice to a wide range of private and public sector clients ranging from developers, occupiers, institutional investors and private clients. During a career spanning over 20 years, Iain has and continues to be involved in most of highest profile industrial property deals in Scotland.

Representative clients and projects include: 

Frasers Property/Oaktree/Patrizia - Appointed in 2015 as Letting agents & development advisors on Scotland's largest and most established business estate, Hillington Park, totalling 2.5m sq ft and benefitting from Scotland’s first and only Simplified Planning Zone.

Canmoor - Letting agents on the 1.6m sq ft Westway Park, Renfrew, Scotland's largest fully enclosed industrial park.

Eurocentral - Advised on various lettings, sales and acquisitions on Scotland's premier distribution park. Brokered deals to a variety of well known organisations, including; Lidl, DPD, Hermes, Wm Morrison Supermarkets, ACS Clothing, Mentholatum, Nagel Group and DX.

Prologis - Provision of development and letting agency advice on 1m sq ft prime industrial scheme known as Prologis M8 in Lanarkshire.  504,000 sq ft and 175,000 sq ft pre-lets to the Co-operative and Brakes respectively.

The Co-operative - Successfully secured mandate to dispose of UK wide portfolio of surplus warehouses totalling 3m sq ft. Approx. 1 m sq ft transacted in Scotland.

Logicor - Letting of Scotland's largest ever speculatively built warehouse; 380,000 sq ft at J4M8 to Amazon. Neighbouring 240,000 sq ft building sold to Schuh.

Freescale Semiconductor Inc - Sale and partial leaseback of 800,000 sq ft manufacturing facility in East Kilbride, Glasgow.

Asda - Sale of 250,000 sq ft distribition warehouse facility in Grangemouth.

St Modwen Properties plc - Provision of acquisition advice for purchase of 32 acre former Rolls Royce facility at Hillington, Glasgow.  Retained to provide Agency advice on 750,000 sq ft estate, rebranded Pegasus Business Park subsequently sold whole site to MEPC. 

 

View expert

Lewis Pentland

Associate Director

Edinburgh

Industrial & Logistics property specialist, based in Edinburgh with a focus on the east of Scotland - covering acquisition, disposal, development and general agency advice.

Considerable experience across various other sectors, including disposal and acquisition/re-gear of city centre and business park offices, development land disposals and Scotland wide retail disposals.

View expert

Kim Inam

PR Manager

London - West End

I have joined Colliers International after working for five years in local authority in-house communications roles, leading media and marketing in the environmental, licensing, regeneration and planning sectors. 

Prior to joining local authorities I worked for eight years' experience in journalism in north London reporting on a wide range of subjects including politics, crime, health and housing. For three and a half years I managed the team of reporters to produce nine weekly newspapers, a  monthly supplement and the newspapers' social media platforms.

View expert