Changing demand for Edinburgh industrial space
Growing start-ups are changing demand for industrial space in prime locations across Edinburgh and the Lothians but the lack of supply means that finding suitably-sized properties is proving difficult for many.
In the last six to nine months Ryden has recorded an increase in requirements and deals involving properties in the 2,500 - 5,000 sq ft bracket in areas such as Bilston Glen and West Edinburgh. In fact, around 30% of enquiries stem from successful starts ups that now need space of this size to expand into from incubator units as they enter the next phase of their business life cycle.
An increase in take-up for property in this range may impact upon the average deal size and this could be positive for the market as long as there is demand for the space they vacate. However we currently predict that there will be an increase in vacancies among smaller units, especially in the east of the city. This could peak in this year, when the number of business fails also peaks as we see the end of a two-year cycle for businesses that began life in the 2008-2009 start-ups boom.
Restricted supply and increased demand could bump up rents and reduce incentives. Currently rents sit around £5.50 to £6.50 per sq ft in this size bracket.
Illustrating the trend, growing companies DM Audio and PM Solutions have recently taken space at Newhailes Industrial Estate and Bilston Glen respectively. DM Audio paid £5.50 per sq ft for its 5,000 sq ft unit; PM Solutions paid £6.00 per sq ft for its 2,500 sq ft unit.
But there is a shortage of property within the 2,500 sq ft - 5,000 sq ft range, especially in West Edinburgh, where there is no available property at all below 5,000 sq ft. To help address this, developers J Smart & Co and Northern Trust are both planning to start building new developments within the next 12 months.
Across the country, speculative development is still being hampered by problems accessing funding, so developers and their agents are being creative to get schemes off the ground, such as in the case of one J Smart & Co scheme, which got moving after the Council granted a ground lease to them. Hopefully when these schemes are completed they will help to address the undersupply that is currently hampering the expansion of Scotland's growing new businesses.
For more advice contact Alan Herriot on 0131 473 3382 or alan.herriot@ryden.co.uk
