NEW research has highlighted a ‘critical mismatch’ between the supply and demand of industrial space of all sizes across Scotland.
Property and investment management firm Colliers said demand for industrial and logistics space is leading to upward pressure on rents.
The firm is warning that a ‘perfect storm’ of factors has caused the issue, including the pandemic accelerating the trend towards online shopping. The situation is also being exacerbated by increased construction costs and a shortage of building materials.
Iain Davidson, director of industrial & logistics with Colliers in Glasgow, said, “Demand is exceptionally strong for industrial space in Scotland. However, the lack of supply has had a significant effect on take-up. Despite relatively low take-up, the market is strong. It’s just that there’s a real dearth of supply for occupiers to take.
“We have a perfect storm. While developers are keen to bring forward new speculative developments, build cost inflation and a shortage of construction materials are proving a challenge. As a result, occupiers will inevitably face rent increases.”
Research by Colliers shows current availability of industrial space is at an ‘all-time low’ in Scotland, with a vacancy rate of 4%. Take-up of space in the west of Scotland was down 36% year-on-year in the first six months of 2021 and supply was down 25.9%. In the east of the country, take-up fell 1.8% and supply dropped 14.7%.
Focusing on the east of Scotland, Lewis Pentland, associate director of industrial & logistics with Colliers in Edinburgh, said, “In the last few months we have witnessed persistent demand with a good run of lettings up to around 15,000 square feet, as well as a handful of larger deals. We’re seeing estates with historically low levels of vacancy and the shortage from 20,000 sq ft upwards continues. A number of occupiers are unable to satisfy their requirements from existing stock.”
Despite the challenges, Colliers said deals are still being done. Skyrora recently agreed a lease of 52,000 sq ft in Cumbernauld and Caledonian Logistics took 38,000 sq ft at Wardpark Industrial Estate in Cumbernauld. Over the past year, Colliers disposed of 300,000 sq ft at at Eurocentral to the NHS.