Colliers: Demand remains strong in Scotland industrial and logistics market despite COVID

Colliers: Demand remains strong in Scotland industrial and logistics market despite COVID

Iain Davidson

Scotland’s industrial and logistics commercial property market has seen strong demand throughout the COVID-19 pandemic and this performance is expected to continue, according to a new survey by Colliers International.

The report has found that demand for industrial space has continued to come from a broad range of sectors, such as medical, food and drink, engineering, storage and distribution. It explained that increased online commerce and more localised storage and production are likely to sustain demand.

Iain Davidson, director of Industrial and Logistics at Colliers International in Glasgow, said: “While it would be naïve to think the industrial and logistics sector in Scotland may be totally immune to the economic fallout, the pandemic has super-charged an already strong market. Tight supply is continuing to bolster 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.”

Colliers found that take-up in Glasgow in the first three quarters of this year remained strong, despite the current difficult climate. At 2.6m square feet, it is up 24 per cent year-on-year and Colliers expects more deals to be confirmed, which will increase overall demand for the period.

Mr Davidson continued: “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.”

Amazon has been at the forefront of recent deals 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 re-geared its 290,000 sq ft warehouse in Inverclyde.

Parcel delivery firms have also been increasing their footprint as e-commerce grows. DPD let 37,000 sq ft in Cumbernauld and Hermes increased its presence at Eurocentral, where it will occupy 94,000 sq ft at Colossus 2. Colliers advised on the letting of a speculatively-built 18,000 sq ft unit at Gartcosh Industrial Park to DX Network Services and the 50,000 sq ft acquisition by Whistl at Tannochside Park, Uddingston.

Healthcare-related demand is a prominent feature of current market activity. Having already leased 170,000 sq ft to this sector at Eurocentral earlier in the year, Colliers expect to announce further major transactions within the Park shortly, totalling some 300,000 sq ft.

Lewis Pentland, associate director of Industrial and Logistics at Colliers International in Edinburgh, added: “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 Scottish capital has increased significantly, by 78% year-on-year to 696,000 sq ft, although that is compared to a relatively slow first three quarters of 2019.

Among some of the largest deals of the last 12 months, frozen food retailer Iceland recommitted to 284,000 sq ft at Houstoun Industrial Estate, while Saica Packaging acquired a 290,000 sq ft distribution hub at Deans Industrial Estate, recently vacated by Lidl, in Livingston

Larger deals signed during the first lockdown period included Honeywell International’s ten-year renewal of 52,000 sq ft at Lochend Industrial Estate, Newbridge and the sale of modern 32,000 sq ft unit in Oakbank Business Park, Livingston, negotiated by Colliers.

Mr Pentland said: “Limited availability is expected to sustain rents over the foreseeable future in Edinburgh and surrounding areas. The larger end of the market has held up better than predicted and while enquiries from SMEs on smaller stock had all but vanished immediately after the COVID-19 outbreak, activity has picked up and we have concluded a number of lettings since.”

Looking ahead, Mr 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-19 infection curve, without further stagnating economies.

“But the industrial sector is set to outperform its peers with rents expected to grow on an annualised base this year and next as supply of available warehouses remains constrained, coupled with a limited development pipeline.

“While we are likely to see some business failures across a number of sectors, the industrial market in Scotland should be well placed to weather this storm, given its strength before COVID-19 hit.”

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