Scotland’s industrial property market saw investments soar from £128m in 2016 to £346m last year, with smaller units proving the most popular investment in the sector, particularly in Edinburgh and Glasgow.
The latest figures from property consultancy Knight Frank have revealed that the huge increase in investment into industrial warehouses and sheds was mainly seen in the market for units under 5,000 square feet, which saw excess demand push up rents in many areas. Meanwhile, larger units of more than 50,000 square feet experienced a slowdown, with very little activity in Edinburgh or Glasgow in this market.
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Aberdeen, home to the UK’s oil industry, has seen a downturn in recent months which has led to decreased demand and low uptake of industrial space pushing rents down, diminishing investment levels. However, activity in the city is expected to pick up in the coming year, amid predictions of a more stable oil industry, as well as the attraction of the lower rents now in the area.
Simon Capaldi, agency partner at Knight Frank in Edinburgh, said: “We’re seeing the central belt economy return to normal growth, which is reflected by the significant increase in industrial investments in Scotland over the past six months.”
Attractive prospects for landlords
Capaldi added that the lack of supply and shortage of new-build activity in Scotland’s major cities has pushed rents up, particularly for the more desirable, smaller units of less than 5,000 square feet. “This is a significant issue in Glasgow, which, while offering a number of vacant high-profile units, is not currently geared up to accommodate growth at the smaller side of the market.
“In Edinburgh, higher values attributed to developments for residential, leisure, hotel and retail units, mean we’ll likely see the cost per square foot of industrial space continue to rise throughout the year as developers follow the money.”
According to Knight Frank’s capital markets partner James Fergusson, the outlook is very bright for landlords looking to invest in the sector in Scotland, as vacancy levels are low, keeping rents strong which could “filter into more secondary areas”.
He added: “Broadly speaking, the sector continues to strengthen and with a more optimistic outlook from buyers with regards to the political and economic backdrop, we’d expect demand to continue rising from investors and yields to become more comparable to those being achieved in England.”
