Business, Freight News, Logistics

Scotland is full, says Colliers

[ August 9, 2017   //   ]

Real estate firm Colliers International says that businesses will soon have to resort to building their own factories and warehouses in Scotland.

Prime industrial rents for 10-50,000 sq ft units have risen three times faster year on year than the UK average as the lack of building activity forces businesses to compete for available space, according to its latest figures.

It found that prices for prime industrial space rose on average 7.7% in the 12 months to July 2017, compared with only 2.3% for the UK as a whole. The current Scotland average is £7.59 per square foot (psf) while the current UK average is £8.68 psf.

It says that the biggest concern is the area around Glasgow, which accounts for much of Scotland’s industrial and logistics needs but is running short of space to accommodate the growth in manufacturing and the retail delivery and distribution segment.

Senior research analyst, Research and Forecasting, Bo Glowacz, said: “Availability has been declining gradually year on year in Greater Glasgow to the present 7 million sq ft. The overall vacancy levels have also been falling from 10.2% in 2012 to 8.0%. In terms of quality of the available stock, the vast majority is of poor second-hand quality with only 3% being new and refurbished stock.”

Glowacz added that the Scottish Government’s ending of 100% rates relief for empty industrial properties last year is likely to restrict speculative development, and indeed there are currently no such larger buildings planned in Scotland.

“Indeed, there are virtually no new or nearly new available buildings of between 30,000 and 95,000 sq ft, and just 3 modern warehouses of over 95,000 sq ft currently available, all within Eurocentral.”

Colliers believes that demand for industrial units is being driven by the growth of online shopping and the recovery in manufacturing which is now accelerating due to the weak pound. Glowacz said that firms that need large units are likely to build their own or have them ‘built to suit’.

“Occupiers have benefited from competitive pricing over the past decade, but rising build costs and higher environmental standards are also placing cost pressure on required rental levels, not to mention empty rates that will now have to be factored into developers’ appraisals. Moving forward, pricing will need to be at new levels for projects to be viable.”

Another Colliers study recently found that the UK has a just over one year’s worth of industrial space left of the market, following a 62% fall in availability since 2009. In Scotland, that figure is closer to 2.5 years after a decline of 44%.

Head of Colliers International’s Industrial and Logistics team in Scotland, Iain Davidson, warned: “Many businesses now see modern, good quality premises as a way to operate more efficiently. Having to commission their own new-builds has its advantages as they will get tailor-made facilities, but it is a slower process, which could be a drag on the economy, just as the much-touted manufacturing-led recovery is gaining pace. The Scottish Government should be seeking to encourage commercial building, not placing barriers in its way such as the abolition of rates relief.”