Demand surges for industrial units amid pandemic
Demand remains strong i n Scotland’s industrial and logistics property market despite the impact of the coronavirus crisis, a new study suggests.
Property experts at Colliers International said demand for industrial space has continued to come from a broad range of sectors including medical, food and drink, engineering, storage and distribution.
They believe that the surge in online sales and more localised storage and production are likely to sustain demand. The firm’s latest industrial and logistics research looks at the year to the end of September and covers both east and west Scotland.
Iain Davidson, director of industrial and logistics at Colliers International in Glasgow, said: “While it would be naive to think the industrial and logistics sector in Scotland may be totally immune to the economic fallout, the pandemic has supercharged an already strong market. Tight supply is continuing to b olster rents and values. Supply of accommodation has reached critical levels and we’re likely to see take-up impacted, as occupiers struggle to find suitable premises. We therefore need a much stronger development pipeline and fast.”
He added: “In Glasgow, the market has been experiencing an under-supply in prime areas and increased demand for newer commercial property, which has been exacerbated by a limited development pipeline over the past ten years. Many key estates remain close to full occupancy due to new lettings and existing tenants renewing leases.”
The study found that take - up in Glasgow in the first three quar ters of 2020 remained strong, despite the current difficult climate. At 2.6 million square feet, the total is up 24 per cent year-on-year and the firm expects more deals to be confirmed.
It noted that Amazon has been at the forefront of recent deal activity in the west of Scotland, with the pre-let of a 144,000 sq ft “build-to-suit” distribution hub at Glasgow Business Park agreed just months after it regeared its 290,000 sq ft warehouse in Inverclyde.
Meanwhile, Lewis Pentland, associate director of industrial and logistics at Colliers International in Edinburgh, said: “In the Edinburgh market, take-up between the first and third quarters of this year has been higher than might have been expected, given the current climate.”
Take-up in the capital and surrounding areas was 78 per cent higher year-on-year at 696,000 sq ft, although that compares with a relatively slow first three quarters of 2019. Among some of the largest deals of the last year, frozen food retailer Ice - land recommitted to 284,000 sq ft at Houstoun Industrial Estate, Livingston, while Saica Packaging acquired a 290,000 sq ft distribution hub at Deans Industrial Estate, recently vacated by Lidl, also in Livingston.
Larger deals signed during the initial lockdown period included Honeywell International’s ten-year renewal of 52,000 sq ft at Lochend Industrial Estate, Newbridge, and the sale of a modern 32,000 sq ft unit in Oakbank Business Park, Livingston.
Davidson added: “The political, economic and social uncertainty stemming from the Brexit negotiations and the pandemic will not dissipate over the next few months, unless the UK and the EU are able to reach free trade agreement and countries find a way to successfully control the Covid infection curve, without further stagnating economies. But the industrial sector is set to outperform its peers.”