A squash and a squeeze…

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Rising demand and falling supply. English market conditions have finally arrived in Scotland. Liza Helps reports.

The latest Scottish Property Review by Ryden states that the industrial market is on the verge of more sustained activity raising the possibility that lack of supply may become more of a concern in 2014. David Cobban of Savills says: “The market characteristics experienced in England over the last two years have finally arrived in Scotland. Falling supply, no significant speculative development and improving demand is now evident.”

“2012 saw significant lettings of large speculative industrial units, which had been developed with the assistance of Golden Contract arrangements. This was a catalyst to erode supply and in 2013 there was a substantial number of sales of large second hand distribution units continuing this trend.

“A return in confidence in the bulky retail market has resulted in new retailers expanding into Scotland and existing parties growing their operations. This has increased the need for strategically located distribution centres to service the new stores across the country and to address the demands of the expanding home delivery service required by customers.”

According to Knight Frank’s latest figures take up in units of 50,000 sq ft and above was almost 1.55 million sq ft in the second half of 2013, up 55 per cent on the first half and almost double the 2012 total.

Deals done included the sale of Anglesea Capital’s property known as J4M8 240 totalling 244,644 sq ft to fashion footwear company Schuh some six years after completion at a price believed to be under £30 per sq ft. The property has 15m eaves as well as 22 dock levellers and extensive car parking. Letting agents were Colliers and GVA James Barr while Ryden acted for Schuh.

Cobban adds: “As confidence returns and demand increases the new challenge is the lack of appropriate stock in the industrial market across Scotland.”

Iain Davidson of Colliers agrees: “Occupiers seeking modern, good quality accommodation, and prime locations are facing a lack of supply – something that many occupiers are still failing to grasp as they mistakenly assume there is a plethora of options around.”

“Such is the shortage,” says Stephen St Clair of Knight Frank, “that there are only five new units built that have never been occupied.”

These include two buildings on Arisaig Property Partners’ Centralpoint Logistics Park at Eurocentral located next to the M8 motorway.

The Titan building, which extends to 122,483 sq ft offers 116,987 sq ft of warehouse space and 5,496 sq ft of first-floor office space, a 48m deep yard, 12m eaves, 12 dock levellers and four standard doors, plus fast access to the M8, M73 and M74.

While the Atlas building totals 56,508 sq ft with a 31 m deep yard with expansion potential, 10m eaves, four ground access doors, a 50kn/per sq m floor loading and 33 car parking spaces. The buildings are being marketed by Jones Lang LaSalle and CBRE.

At Muse Development’s Eurocentral scheme, there are two buildings available for immediate occupation. These include the 92,997 sq ft Zenith unit and the 129,183 sq ft Vertex unit. Letting agents are CBRE and Ryden. Quoting rent on Vertex is £5.85 per sq ft on a ten-year lease and £5.50 per sq ft on Zenith on a ten-year lease.

Muse Developments sanctioned a £21.2m speculative build commitment in April 2010 to construct two buildings, one of which was Zenith, on the 17.4 acre site known as ‘Plot F’. This was followed by an additional £33 million speculative investment in March 2011 which delivered two further buildings that included ‘Vertex’.

The last of the five is Anglesea Capital’s Max 380, a 382,391 sq ft warehouse originally developed by Gladman which benefits from 15m eaves height, 65 dock levellers and level entry doors and bespoke floors constructed to the occupier’s requirements up to 65kn/sqm. Letting agents are CBRE and GVA James Barr.

There are second hand units available but not all these are in prime locations. Big Blue Shed at Bellshill Industrial Estate in Lanarkshire, is back again on the market through Jones Lang LaSalle. The building totals 143,700 sq ft, set on a 6.1 acre site. With a shortage of good quality space occupiers may have to look to D&B. Bryce Stewart of Colliers says: “Strong demand and poor supply is now leading to a return to design and build activity.”

“While historically a feature of the big shed market, build to suit bespoke buildings may become a more common feature of the market for smaller size ranges given the shrinking supply,” warns Davidson.

“Luckily,” says David Rolwegan of CBRE, “there is still plenty of land.” Muse Development has some 120 acres at Eurocentral still to develop and has 24 acres in three plots that are fully serviced with planning already secured that could accommodate a total of 450,000 sq ft of space. “Buildings could be up and running within nine months… Anyone looking for a 100,000 sq ft and above will have to go down the D&B route.”

Stawsons’ two million sq ft J4M8 scheme, just off Junction 4 of the M8 motorway, has land available that can accommodate up to 750,000 sq ft of warehouse space in units from 35,000 – 350,000 sq ft on a D&B basis. Jones Lang LaSalle and Ryden are joint letting agents.

Scottish Enterprise has 34 acres at Gartcosh Enterprise Interchange north-east of Glasgow on the M73, that could accommodate distribution facilities. The opening of Junction 4a of the M8 motorway is the start of a £650 million regeneration known as Heartlands where 1.5 million sq ft of business space can be developed.

However while the majority of these developments will accept storage and distribution uses the new jewel for logistics occupiers must be PD Stirling and Cranbroe Estates’ proposals for a £250 million Mossend International Railfreight Park in Central Scotland.

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