Scottish industrial rental growth forecast to outpace offices and retail

RENTAL growth in Scotland’s industrial and logistics sector has been tipped to outpace both offices and retail property assets over the next five years.

Knight Frank said that based on forecasts from RealFor, rents for Scottish industrial property are likely to see an average increase of 3.1% per annum between 2022 and 2026, ‘significantly’ outperforming the expected growth of 0.9% and -0.3% in the office and retail sectors, respectively.

Scotland’s central belt will have higher than average industrial property rental growth, with Edinburgh predicted to see a 3.4% rise and Glasgow at 3.3%.

Knight Frank said the current supply and demand ‘imbalance’ for space looks likely to continue, with planned speculative development not enough to meet projected requirements.

The findings build on Knight Frank’s 2022 Logistics Market Outlook report, which found industrial rents across the UK are expected to rise by an average of 4.2% per annum over the next five years.

Scott Hogan, head of Scotland industrials & logistics at Knight Frank, said, “Industrials is still the hot sector throughout the UK and that is no different in Scotland. Rents outpaced other types of commercial property last year and, largely driven by the lack of new development in recent years, they only look likely to continue to do so – particularly in and around Glasgow and Edinburgh, where the supply-demand imbalance is especially acute.

“The market is, however, beginning to change and rising rents will encourage more speculative development. We are already in a new development cycle, with space coming onstream on the outskirts of Edinburgh and industrial hubs in and around Glasgow.

“While they will help alleviate some of the supply shortage, it is unlikely to be enough in the face of sustained high demand. Developers are also facing a combination of challenges including inflationary pressures, delivery disruption, and shortage of supplies and labour, which could limit activity in the short term.”