By Ian Manson, chief executive, Clyde Gateway
The second half of 2017 has seen the beginning of what looks like a resurgence in the central belt’s commercial property market. It is most likely making up for lost time, after May’s general election and uncertainty on whether a second independence referendum might be in the offing, led to many businesses putting big decisions off.
The industrial sector in particular is showing strong levels of demand. There’s a healthy appetite for high quality industrial property in Scotland’s central belt, which is in short supply after many years when very little speculative building was going on.
The development market is now finally responding, with a number of new-build industrial units recently completed or currently on site. But until it catches up with demand, occupiers looking for industrial premises in central Scotland’s best locations are faced with very limited options.
As you might expect, this shortage of supply means rents are growing – prime headline rents in central Scotland trade parks are around £107 per sq m, with rents at general prime locations firmly established between £81 and £91 per sq m (source: Ryden). The Small Business Rates Relief initiative has also boosted the rents of smaller units, as an increasing number have the potential to be rates-free for qualifying occupiers.
The current vacancy rate for the greater Glasgow industrial market is only 5.2%, and as many vacant properties need re-developed or refurbished, the true availability of ready-to-occupy properties is even lower. To put this in context, vacancy rates of 30% were not unheard of during the 1990s.
It’s no longer just manufacturers who need industrial property. One area of rapid growth is the rise of online shopping and increasing customer expectation that their goods will be delivered the next day. According to research by Prologis and Aberdeen Asset Management, an online fulfilment needs three times as much warehouse space as a high street retail transaction. This means retailers need more and more storage sheds all over the country.
In popular industrial estates, occupier turnover is low, with existing tenants often staying put simply because there’s nowhere else suitable to go.
A combination of all these factors means that if there is any significant upturn in market activity, the shortage of modern, fit-for-purpose industrial properties could become so severe that it restricts economic growth.
At Clyde Gateway, we have gone against the grain when it comes to industrial property, and are now reaping the rewards in terms of lettings secured. Over £1.5 billion has been invested in the Clyde Gateway area over the last nine years, from both the public and private sector. Thanks to investment support from major national developer MEPC, Clyde Gateway East Business Park beside the M74 has been one of the few locations where industrial units have been built speculatively in recent years.
Clyde Gateway East has been extremely successful, securing high calibre tenants including BT, Glacier Energy, Dentec Scotland, Cusack and most recently The Greencore Group. The feedback from tenants has been overwhelmingly positive. We’ve just finished building a new 27,500 sq ft speculative unit at Clyde Gateway East, and have had a healthy number of enquiries already.
In addition to the Clyde Gateway East offer, local developer Harris Finance has been building speculatively at Rutherglen Links Business Park, after buying land which had been remediated and prepared by Clyde Gateway. It secured Screwfix as its first occupier and Eurocell, another national trade counter, have taken the adjoining unit. Terms are close to agreement for another bespoke 13,000 sq ft unit, and a new 20,000 sq ft unit is now complete and available for tenant fit-out.
Clyde Gateway’s reputation as a business location is growing all the time, not just because of the excellent transport links but also due to the business support and superfast broadband we can provide. Infrastructure and connectivity are major drivers for the industrial property market, so there’s no doubt that the completion of recent improvements to the Raith interchange and the motorway network to the east of Glasgow has enhanced the area’s attraction and competitiveness even further.
I am confident that strong demand for the high quality industrial property we can offer, combined with a continued lack of supply, will ensure 2017 ends on a high for Clyde Gateway.