Take-up in Scotland’s Central Belt industrial market has been on the increase since 2012, depleting stock to leave only three years' worth of supply across all quality grades along the M8 Corridor. Much of this is obsolete, unfit for today’s typical occupier profile and is often unviable to refurbish.

In terms of Scotland’s big shed (over 100,000 sq ft) market, where demand is principally driven by distribution and third-party logistics companies, supply is at a critical stage, particularly with the recently reported news that the 385,000 sq ft facility at J4M8, Bathgate has been taken by Amazon. This essentially leaves just five ‘big sheds’ available for immediate occupation across the Central Belt. While the big shed market is traditionally less active than the smaller end of the market, demand for good quality space currently exceeds supply.

Despite the level of demand, speculative development in the Central Belt remains extremely low, with just two developments underway: the recently completed Belgrave Point (approx 20,000 sq ft) and the new 85,000 sq ft four unit 'Evolution' scheme to the West at Hillington.

The poor level of activity is due to developers in Scotland unable to make worthwhile returns as rental levels are outweighed by construction costs and a lack of public sector assistance. The abolition of empty property rates relief is expected to exacerbate this issue.

Therefore until Scotland creates a strategy to assist land and property owners to bridge the viability gap and build more warehouses, occupiers looking for good quality, sizeable industrial units are faced with either a design and build solution, which comes with a lengthy lead in time or – in some cases – a relocation south of the border.

Changes need to be made to support future development and also shift sentiment among occupiers. Rents for larger facilities must increase from the traditional £5/£5.50 per sq ft if we are to move Scotland’s industrial market forward. Occupiers will have to work more closely with developers to ensure they are able to secure a facility specific for their needs and also must be prepared to pay a fair price to enable the building’s viability.

In the meantime, supply will have to come from existing well-located industrial estates. Opportunity therefore exists for hands-on landlords who have the resources to undertake good quality refurbishment programmes. If occupiers come to expect that rents will be higher on new stock, we could see a flurry of activity in the refurbishment market, however the supply of this won’t come close to satisfying the level of demand across the sector.

It’s time to reassess.

Further information

Read Savills latest Big Shed briefing