As industrial rents across Scotland’s Central Belt continue to climb against a backdrop of diminishing supply and an absence of new development, landlords willing and able to invest in the refurbishment of existing assets have an opportunity to reap real rewards.
The supply of good quality industrial units along Scotland’s M8 corridor has been severely compromised for a prolonged period of time, with construction costs and a lack of competitive funding conspiring against the feasibility of developing new industrial units. A common feeling of frustration among landlords and tenants alike is caused by the difficulty Scotland’s industrial sector has in meeting targets for investment returns and operational needs respectively. As long as the investor/developer is unable to deliver a viable industrial development, the progression of occupational businesses is prevented through an inability to relocate to expand, grow and adapt.
A squeeze on supply is pushing up rents on existing industrial accommodation, including at Queenslie Park where Savills has secured lettings moving rents on from £3.75 per sq ft to £4.25 per sq ft in the last 12 months and at Buccleuch’s Belgrave Central, Bellshill Industrial Estate, where rents are now £6.50 per sq ft, up from £5.50 per sq ft.
Until now, along with a lack of speculative development, there has also been a scarcity of newly refurbished industrial accommodation in the Central Belt area. However, evidence of new refurbished units letting quickly, some pre-letting, is likely to propel other landlords into doing the same. Schemes like Canmoor’s Westfield North Courtyard in Cumbernauld has seen 40,000 sq ft of new lettings across five refurbished units, leaving only one unit of 14,000 sq ft available. Collectively the deals have increased the headline rental rate at the industrial scheme from £3.75 per sq ft six months ago to £4.50 per sq ft today. At C2 Capital’s Anniesland Business Park, recent lettings on refurbished space, including the arrival of Screwfix on the park, have more than doubled rents from £2.50 to £6.25 per sq ft.
Scotland has long seen a game of cat and mouse in which landlords of industrial stock have often been reticent to spend money to improve buildings until a tenant had been secured. However now, wherever possible, landlords should look to harness the encouraging demand and rental growth and look to refurbish units to attract the occupiers.