How many times have you read: “Scotland struggles to emerge from its industrial past” – or similar? If you are old enough, you probably first read it more than 20 years ago. It’s as true now as it ever was.
Throughout Scotland, warehouse development is an industry based on the renewal of failed industrial sites. However, warehouse development there is. And agents wish there were more of it.
John Stevenson of NAI Fuller Peiser in Edinburgh sees a future for industrial development in the Edinburgh area on two distinct levels: “One level is to service the requirements of the local industry within Edinburgh itself,” he says. “There is a critical shortage of small to medium sheds up to 30,000 sq ft. It is almost impossible to acquire a modern industrial unit in Edinburgh. The overriding preference from occupiers is to purchase units.”
Land supply is the key problem. Over the long-term, the eastern Leith Waterfront can provide land. “Apart from that, there is no strategic land available at present,” says Stevenson. “Supply will remain tight. This is resulting in the leakage of demand out of Edinburgh to Livingston, Broxburn and Bathgate in West Lothian and Midlothian.
The second level, Stevenson says, is more strategic provision of larger sheds and RDCs to meet the demands of the logistics sector moving forwards. Recently two large sites capable of accommodating speculative development at Newbridge and Livingston have gone for alternative use or owner occupation. There are encouraging signs of developer interest with plans announced for 600,000 sq ft of spec build at J4 of M8. “We are aware of a number of outstanding requirements for sheds in excess of 100,000 sq ft,” he says. “The M8 corridor sheds market has never met this provision before. It’s long overdue that strategic RDCs are developed to meet the demands of the sector and particularly in the light of the Working Time Directive.”
While less of a problem, land availability is tight at strategic locations. “There is also a historical resistance by planning authorities to Class 6 development of some employment land,” says Stevenson. “Currently, there is only limited availability of large sheds and only a handful in excess of 100,000 sq ft.”
A short-term let earlier this year can claim to be Scotland’s largest industrial letting for five years. The former Cummins Factory at Shotts has gone on a two-year lease to TDG. The factory closed in 1997 with the loss of 700 jobs. Re-branded as Centrelink 5, new owners Welsh property entrepreneur Richard Hayward and Jersey-based David Kirch, along with Steven Griffiths of Collins Stewart Property Fund Management are drawing up future redevelopment scenarios for the North Lanarkshire site which retains the original industrial units which were built 20 years at a cost of £28 million.
TDG has signed-up for an initial two-year lease on Units 4 and 5 which extends to 238,000 sq ft. The TDG deal arranged by King Sturge represents one of Scotland’s largest industrial lettings for around five years.
Douglas Patrick, Industrial Partner of King Sturge comments: “TDG is one of the few logistics companies expanding its operations in Scotland. The availability, quality and location of the building were the key drivers in this transaction – the building is only two minutes from junction 5 of the M8.”
Two years ago TDG completed another large industrial deal when they agreed a 10-year lease on the 125,240 sq ft former Scottish Power Building at Eurocentral.
One possible long-term option for the future of the Centrelink 5 site includes developing a Scottish history theme park and film studio for cult film producer Robin Hardy. Richard Hayward is discussing this option with Hardy who has been examining Scottish locations for some time now. Hardy said the scheme could have a studio to film those effects, which could also be used to shoot television series and feature films. The remaining 150,000 sq ft of high quality industrial space at Centrelink 5 is being marketed by joint agents King Sturge and Donaldsons. King Sturge advised TDG, while Richard Hayward and David Kirch were advised by Steven Griffiths of Collins Stewart Property Fund Management.
Among recent warehouse purchases in Scotland, Arlington Securities bought Etna Industrial Estate in Motherwell, Lanarkshire, Scotland, on behalf of an investment client for £1.85m, reflecting a 7.5 per cent net initial yield.
It bought the former SDA industrial estate from HXRUK, advised by Ryden. It totals 43,000 sq ft (3,995 sq m) of industrial/warehouse accommodation with generous yardage/parking.
Bill Binnie, investment consultant at NAI Fuller Peiser’s Edinburgh office which advised Arlington, comments: “Etna Industrial Estate offers strong potential for short-term rental growth.
“It is strategically located adjacent to the proposed redevelopment of the former Ravenscraig Steel Works site, one of Europe’s largest urban regeneration projects. The Ravenscraig scheme will create a new town centre totalling almost 300,000 sq m, which wil,l we believe, drive forward rental levels in the area.”
Meanwhile, Dundas Commercial Property Fund II, advised by NAI Fuller Peiser, has completed the acquisition of Portal House at Tannochside Business Park, Uddingston for £4.3 million. The park was created on the former Caterpillar factory site and now provides 742,710 sq ft (69,000 sq m) of office/warehouse accommodation.