Logistics Property Regional Focus SCOTLAND & NORTH-EAST ENGLAND Looking up
With the Commonwealth Games behind it, and the independence referendum on the 18th September ahead, Scotland is in an excitable state, says David Thame.
Whoever wins the referendum – Mr Salmond’s ‘Yes’ or Mr Darling’s ‘No’ – the economy of Scotland will change in the
coming years. That is because whether it stays in the Union or leaves for independence, Scotland’s government will win substantial new tax and borrowing powers which will infl uence businesses’ decisions in Scotland. For distributors, whose plans are often limited to the few years of the latest contract, this is a tricky time. It’s hard to know what’s ahead. The good news is that they are probably able to cope with whatever gets thrown at them because Scotland’s logistics property market has come out of recession looking remarkably strong. According to surveyor JLL, total take-up of industrial property of all types was around 9m sq ft in 2013, an impressive 46% up on the previous year. Most of the activity was for smaller units with agents reporting that the bulk of enquiries are still for units below 10,000 sq ft. The Baillieston Distribution Centre, Glasgow is typical of the Scottish market.
RISING DEMAND
Demand for larger warehouses lifted, but only slightly, with the take-up of units over 100,000 sq ft rising just a tiny 9% to 2.2m sq ft. Even so, it’s enough to dent supply of good larger units and competitive pressure is allowing landlords to harden the terms they offer. Demand for Scottish warehousing is coming from the usual spectrum of occupiers ranging from parcels operators (DPD is opening a super-depot in Edinburgh) and third-party distributors to retailers. Brake Brothers’ decision to take a 172,600 sq ft built-to-suit unit at Motherwell is a sign of the tightening market. The deal with Prologis sees the catering business take a 25-year lease on the unit at the Prologis M8 site, Newhouse, Motherwell. It expects to take occupation next month and have an option for another 50,000 sq ft.
18 September 2014
Brake Bros joins the Co-Op at the M8 site. The Co-op has a 503,000 sq ft regional depot at the Prologis facility.
Central Belt-based retailer Schuh was also forced to take the plunge. The Livingston- headquartered shoe chain agreed to take a new 244,500 sq ft warehouse in the town in an £8m deal with landlord Anglesea Capital. The site is at Junction 4 of the M8 Edinburgh-to-Glasgow highway at the heart of the motorway corridor that dominates the Scottish logistics scene. Colliers International and GVA James Barr acted on behalf of Anglesea Capital and Schuh was represented by Ryden. Since the Schuh deal, activity has been steady without being spectacular, mirroring the logistics market throughout the UK.
The location at the the Baillieston Interchange linking the M8, M74 (M6) and M73 (M80) motorways is among the most highly prized in Scottish warehousing. No wonder the refurbished former DHL building has proved so popular, following a short-term let to the Royal Mail with a more substantial deal. Sales like that at Baillieston are increasingly common in the Scottish warehouse scene. The Co-Op sold a 260,000 sq ft depot at Dunfermline to FMC Technologies. The 24- acre site at Pitreave sold rapidly as occupiers circled the handful of good potential locations. Airfreight-related logistics property is still a minority interest in Scotland, but it’s growing. A new 43,000 sq ft airport freight unit is to be built at Glasgow Airport thanks to Scottish Widows Investment Partners. Its 150,000 sq ft Air Cargo Centre next to junction 28 of the M8 motorway will be a test of the extent of demand. Top rents in Scotland are beginning to tick up from £7 a sq ft around Edinburgh, just short of a mighty £9 a sq ft in boom-town Aberdeen, and around £5 a sq ft elsewhere.
www.shdlogistics.com
NORTH-EAST ENGLAND
The fairly rosy picture in Scotland is not matched south of the border in North-East England. The region had a uniquely miserable 2013. Unlike every other UK region, its take- up of industrial fl oorspace fell last year – down 16% from 2012 to a very modest 3.9m sq ft. The North-East’s market is small and so it may not be fair to draw any very strong conclusions, but some agents speculate that the private-sector-led recovery which is in progress elsewhere in the UK is not doing much heavy lifting in the public-sector- dominated economy of the North-East. This, they say, is the price you pay for relative (if low-level) economic stability. Statistics showing the availability of warehouse space are of purely academic interest in a market where demand is so dramatically subdued. But for the record, JLL says there is around 15m sq ft available, of which 3.7m sq ft is in units over 100,000 sq ft. If speculative development comes in the
North-East it will be small scale and largely aimed at manufacturers, not distributors. Top rents in the region show no sign of moving much beyond £5 a sq ft, and most occupiers are paying substantially less.
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