19 Feb 2021
Leading real estate advisor CBRE has released its market overview on the Industrial and Logistics sector across Glasgow, Edinburgh and Aberdeen in 2020.
David Reid, Associate Director in CBRE Scotland’s Industrial & Logistics team, commented: “2020 was a remarkable year of resilience for the industrial market in Scotland with a total take-up of 5.45m sq ft, of which we were proud to be involved in over 1.5m sq ft of the transactions during the year. 2020 take-up was on par with 2019, however interestingly this was achieved over significantly fewer deals (320 deals, down from 566 in 2019). The average transaction size was up from 9,500 sq ft to over 17,000 sq ft, reflecting occupiers’ drive for larger properties in response to supply chain challenges emanating from the Covid pandemic.
“The year ahead is anticipated to bring occupier focus on building more resilient supply chains, increasing capacity and diversifying suppliers to safeguard against future disruptions. With Covid accelerating online demand for retail, we also predict increased demand for last mile logistics properties as retailers seek to move closer to their customers. This strong demand, coupled with a shortage of available land, should result in funding being made available for speculative development. In addition, we expect occupiers to increasingly focus their efforts on reducing their carbon footprint as the sustainability credentials of their real estate move quickly up the list of priorities, particularly in new build bespoke developments.”
In Glasgow, the largest market in Scotland accounting for approximately 65 of all transactions during 2020, take-up totalled 3.56m sq ft, up 10% on 2019. Prime industrial rents increased to £8.75 per sq ft, representing a 2.9% year on year increase, whilst rent for logistics properties increased to £6.25 per sq ft, an increase of 14.2% year on year.
David said: “In a year of uncertainty surrounding the pandemic, this was a remarkable story, particularly given the lack of quality stock in the market. If the properties to meet the demand had been available the figures would likely have been a lot higher.
“The speculative development pipeline in Glasgow is fairly limited with only multi-let schemes currently under construction. We are expecting some larger schemes to commence construction within the next 12-18 months, the largest unit likely to be around 50,000 sq ft. We therefore expect continued pressure on rents above 50,000 sq ft and continuation of the trend for bespoke occupier pre-lets.”
Take-up in the Edinburgh market totalled 1.17m sq ft in 2020, down 21% on 2019. It was mainly dominated by large Heritable (freehold) transactions, accounting for 61% of the total figure.
David Reid said: “Take-up has reduced every year for the past three years in Edinburgh, reflecting the severe tightening of supply of existing building stock, lack of consented and serviced industrial land and limited speculative development.
“Again, the development pipeline is very limited with only a small number of multi-let schemes under
construction, and nothing anticipated to come through above 20,000 sq ft over the next 12-24 months. We therefore expect to see further rental growth and pre-let activity in the short term, given we are aware of several unsatisfied requirements.”
The Aberdeen market saw activity growing for the fourth year in a row, despite the wider economic challenges as a result of both the pandemic and the oil price drop. Take-up for 2020 totalled 720,780 sq ft, up 1% from 2019.
Small transactions dominated the market with 41 lettings below 3,000 sq ft and 65 below 10,000 sq ft, however there was also a slight increase in activity in the 30,000 sq ft plus bracket with noted deals to Amazon and FedEx.
Iain Landsman, Associate Director in the CBRE Aberdeen office said: “In Aberdeen the largest transactions were all for the best quality stock or pre-lets. This demand should result in further industrial development within the city and force landlords to upcycle and refurbish older industrial properties coming to the end of their lifecycle.”
David Reid concluded: “We expect 2021 to be another strong year for our market in Scotland. The incredible take-up during 2020 has resulted in critically low stock levels and with continued strong demand we urgently need new speculative development to meet the future needs of occupier requirements. We are working with a number of developers to plug this shortfall in supply.”