Property and investment management firm Colliers is warning that a “perfect storm” of factors - many related to the pandemic - are coming together to create a critical mismatch between supply and demand of industrial space of all sizes across the country.

Covid-19 lockdowns massively accelerated the trend towards online shopping and the need for speedy ‘last mile logistics’ to get goods, including essential medical supplies, to where they need to be without delays. This has driven up demand for suitable space.

Colliers explained that this situation is being exacerbated by increased construction costs and a shortage of building materials that relate to both the pandemic and the impact of Brexit.

Iain Davidson, director of industrial & logistics with Colliers in Glasgow, said: “Demand is exceptionally strong for industrial space in Scotland. However, the lack of supply has had a significant effect on take-up. Despite relatively low take-up, the market is strong. It’s just that there’s a real dearth of supply for occupiers to take.

“We have a perfect storm. While developers are keen to bring forward new speculative developments, build cost inflation and a shortage of construction materials are proving a challenge. As a result, occupiers will inevitably face rent increases.”

Colliers’ analysis shows that current availability of industrial space is at an all-time low in Scotland, with a vacancy rate of 4%. Take-up of space in the west of Scotland was down 36% year-on-year in the first six months of 2021 and supply was down 25.9%. In the east of the country, take-up fell 1.8% and supply dropped 14.7%.

Focusing on the east of Scotland, Lewis Pentland, associate director of industrial & logistics with Colliers in Edinburgh, said: “In the last few months we have witnessed persistent demand with a good run of lettings up to around 15,000 square feet, as well as a handful of larger deals. 

“We’re seeing estates with historically low levels of vacancy and the shortage from 20,000 sq ft upwards continues. A number of occupiers are unable to satisfy their requirements from existing stock.”

Deals are still being done in the face of such challenging circumstances. Skyrora recently agreed a lease of 52,000 sq ft in Cumbernauld and Caledonian Logistics took 38,000 sq ft at Wardpark Industrial Estate in Cumbernauld.

Among some of the largest deals over the past 12 months or so, Colliers disposed of 300,000 sq ft at at Eurocentral to the NHS. Amazon has remained at the forefront of recent activity in Scotland, with the pre-let of a 144,000 sq ft build-to-suit distribution hub at Glasgow Business Park, which had been agreed just months after it re-geared its 290,000 sq ft warehouse in Inverclyde.

Davidson concluded: “Demand for industrial and logistics space is set to remain exceptionally strong in Scotland and speculative development will need to pick up to fill big gaps in supply.”