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Vacancy rate now 3.27%; chronic shortage of quality space
10–12 Cloberfifield Road, Glasgow, where Savills is marketing a unit of 226,000 sq ft
Requirements for units over 100,000 sq ft have risen in the latter half of 2021. Strong levels of transactional activity paired with the redevelopment of old stock has caused the supply to fall to the lowest level on record. This has pushed prime rents 12% higher in the last year alone. We are also seeing reducing incentives and longer lease lengths
Ross Sinclair, Director, Glasgow
Supply
The supply of warehouse space in Scotland for units larger than 100,000 sq ft has fallen 55% in the last year to stand at 0.72m sq ft across five separate units.
The supply continues to be dominated by second-hand space with no new units available. Currently, 33% of the space available is Grade B second-hand space, and 67% is Grade C second-hand space.
Of the five units currently available, four are within the 100,000–200,000 sq ft size band, and there is a single unit within the 200,000–300,000 sq ft size band. The decrease in the amount of supply in the region has caused the vacancy rate in Scotland to now stand at 3.27%. Using the three-year average annual take-up, this equates to just 0.75 years' worth of supply within the market.
Moreover, the 220,000 sq ft former Saica warehouse is now under offer following Savills marketing and is due to conclude early Q1 2022. This will cause the vacancy rate to fall further to just 2.27%, leaving the market chronically undersupplied.
Furthermore, closer analysis demonstrates the supply could be considered far lower as the majority of the Grade C space is not capable of accommodating modern occupier requirements. It may be more suitable for a complete refurbishment or even demolishing.
Take-up
Take-up of units over 100,000 sq ft in 2021 has been robust, reaching 1.22m sq ft across five transactions. This is 43% above the long-term annual average take-up.
In 2021, 45% of take-up has been built-to-suit space, and 55% has been second-hand space. All of the second-hand space transacted this year has been Grade B quality.
Take-up continues to be constrained by both shortages in the size and quality of available units throughout the region; occupiers are having to settle for lower quality, and smaller-sized units to satisfy their requirements.
Development pipeline
The strong levels of take-up along with ongoing enquiries are providing developers with confidence as a number of key sites are being closely considered for speculative development. However, as it stands, there are no current new speculative facilities over 100,000 sq ft proposed or currently available. The Scottish market remains more typically focused on sub-100,000 sq ft speculative schemes going forward.
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