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Logistics units in demand as ‘golden triangle’ booms


A logistics park is planned in Bellshill

Industrial stock and warehousing remains in high demand, particularly in Scotland’s “golden triangle” in the central belt where rents are continuing to rise.

Appetite is strong across the board in the industrial and logistics sector which is witnessing strong impetus, according to the latest report from Lismore Real Estate Advisors.

Occupational demand is increasing “dramatically” with about 1.5m sq ft of unsatisfied requirements in the central belt against a real dearth of new development.

Rents are rising and yields are hardening, but still lag those being achieved in the key locations south of the border.

Speculative development is becoming more feasible and with the demand/supply imbalance, those developers brave enough to get in early will be well-placed to achieve letting and investment sale success.


Simon Cusiter, director of Lismore Real Estate Advisors, says: “In the short-term we anticipate the new development focus being on the golden triangle of the M8/A725 and M74, but the demand/supply dynamics and lack of oven-ready land will certainly open up alternative locations going forward.

“In the Scottish market, the traditional multi-let market continues to be heavily dominated by sector specialists with the mainstream UK institutional market struggling to find appropriate scale in individual lot sizes.

“In terms of logistics, new build or modern, high quality buildings are witnessing strong growth with rents ranging from £7 to £10 per sq ft, with rents for bespoke facilities ranging from £10 to £15 per sq ft.”

“With continued demand, pressure on land and low availability of fit for purpose stock, a rise of 2.5% pa over the next three years could certainly be achieved.

“Some commentators are suggesting that Europe needs an additional 300m sq ft of industrial stock by 2025. With the UK’s share being in the region of 60m sq ft, this could spell good news for developers and landlords”

The Lismore quarterly review of the Scottish investment market points to more positive times ahead. Transaction volumes in quarter two have increased by 71% since quarter one, with circa £300m traded, although activity still remains some 30% below the five-year average, due to the effects of the last year.

Lismore predicts that the second half of the year will be more positive, with around three significant transactions north of £50m understood to be in the pipeline.

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Chris Thornton, associate at Lismore, adds: “Activity in the last quarter has continued to see the wall of overseas equity targeting our best long income assets.

“This has included the emergence of American REITs in the Scottish market, mainly focussed on longer income retail warehousing, with schemes anchored by food stores and value retailers, being particularly liquid. Pricing in this sector has sharpened anywhere between 50-100bps during the course of this year.

“We have also seen the continual growing appetite for anything close to the life sciences sector.

Chris Thornton

Chris Thornton: ‘growing appetite’

“On the downside, city centres are taking time to regain momentum with footfall remaining fickle and retailers and restaurateurs having to work very hard to attract customers back through the doors.

“Retail re-purposing has started in some of the strongest streets but there remains significant challenges for those city centre locations unable to attract alternative use investment.”

“Developers and occupiers are increasingly working hand in hand to create bespoke units, particularly in the logistics sector, which clearly meet tenant specifications and provide occupational certainty for both parties, with tenants willing to pay for an exacting specification.”

The review indicates that prime logistics yields are continuing to harden at 4.50%.

Prime Edinburgh office yields are likely to sharpen before the year end, with limited stock and strong occupational demand the key drivers.

In the value-add sector, offices capable of re-positioning, first generation retail warehousing with underlying industrial or residential potential are in demand, albeit the market remains relatively tight for these kind of deals.

Mr Thornton adds: Overseas investors with a UK presence remain active, with US and middle eastern being the two most active sources of equity. The weight of capital waiting to be deployed is considerable, suggesting it should be a busy end to 2021 with more stock to come to the market.

Knight Property Group is among those behind speculative logistics development in Scotland. Its Belgrave Logistics Park at Bellshill will extend to 250,000 sq ft on a 14-acre former Devro site.

Knight Property Group founder and chairman James Barrack comments: “This is the strongest occupational market we have seen in the past 25 years. There has been a structural shift in the demand for the industrial and logistics sector, particularly with the exponential growth in online shopping, which should lead to longer-term more sustainable growth.

James Barrack: ‘strongest occupational market for 25 years’

“The future hot spots for speculative development in Scotland will always be driven by location, although quite rightly, the ESG agenda is also moving towards the top of occupier’s requirement criteria.

“Availability of oven-ready land which ticks most of the occupier boxes may force tenants to take a view on some compromises.

“Pre-let demand is as high as we have ever seen in this sector but not all tenants can wait for new stock to be built.

“With rising construction costs, the short term winners could be average quality second hand stock which could witness rental improvement if new build pipeline slows.”

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