Article by Neil McAllister, Industrial Agency Partner at Ryden.
Having endured three months of lockdown, you would be forgiven for thinking that the industrial property market is at a relative standstill.
There is no doubt that we are all experiencing very difficult times. Many of our clients are receiving calls from tenants requesting relief from rent obligations, a completely understandable reaction when their income effectively vanished on 23 March.
As a result of the restrictions, we are expecting the overall supply of industrial accommodation to increase over the next 6 to 12 months, with the end of the furlough scheme and the continued effect of Covid-19 on business activity.
Existing supply is limited to only 5% so, in property terms, the market can handle a degree of additional space. Some landlords may, in fact, welcome the chance of new lettings. Will this lead to reduced rents and higher incentives? My view is that it probably will, but most likely for secondary property in terms of location and quality.
Over the last 6 to 8 weeks, the Ryden Industrial Agency team in Edinburgh has experienced a very welcome increase in enquiries levels and also many requests for viewings. There are sectors of the economy doing very well during lockdown, including elements of the logistics market, postal/parcel delivery, internet sales and the food/drink sector.
What has been particularly pleasing to see during lockdown is that two lettings have been achieved at the largest speculative scheme to take place in Edinburgh over recent years, Seven Hills Business Park. A further two units are also under offer to tenants seeking very early entry dates which seems to be a recurring request in today's market. The rent for this estate is £9.50 psf.
Another example of encouraging demand is at Belleknowes Industrial Estate in Fife, where landlords Hermes have refurbished all the vacant units to a high standard and since lockdown terms have been issued on four of the five units. The rent for this estate is between £6 and £6.50 psf depending on the size of unit.
I am feeling cautiously optimistic about the market going forward, particularly for quality buildings in a good location, as said above.
My final comment goes to developers as now is the time to be securing the land and planning consent for new design and build or speculative schemes. With delivery times normally of 18 and 24 months, we should then have (hopefully!) COVID-19 behind us and the market moving on at pace.
For more information on market activity, please do not hesitate to contact the Industrial Agency team: Neil McAllister (0131 473 3212), Alan Herriot (0131 473 3382), Cameron Whyte (0131 473 3230) and Hamish Rankin (0131 473 3210).