What are you seeing in the industrial market in Aberdeen at present?
The word in the Aberdeen Industrial Market is “compromise”. For occupiers seeking modern detached facilities with dedicated yards and car parking of any size, there will almost certainly have to be an element of compromise in the decision-making process. Be it warehouse to office ratios, internal configuration or site layout, specification or rent.
There does continue to be a ready supply of traditional industrial terraced stock, which has seen differing levels of refurbishment. Those refurbished terraced units that can offer some form of yard space will often let reasonably quickly but those that don’t, it can be a case of time and a place for the right occupier.
Why is there a lack of modern detached industrial units?
Strong take-up in 2022 (926,000 sq. ft) and 2023 (839,000 sq. ft) driven largely by the local energy industry, off the back of a relatively stable oil price in excess of $70 per barrel, saw good demand for the best-in-class industrial units. Coupled with almost a complete lack of new build development due to challenging economic feasibility, has led to a number of unsatisfied requirements in the market at present. Indeed, the take-up for 2024 is likely to be significantly lower than the previous two years because of the right product just simply not being available.
What challenges do you foresee ahead for occupiers in the market?
Occupiers will continue to have to compromise on what they are seeking. As a result, some will be forced to stay in their current properties, and this in turn will benefit their landlords with longer leases and/or higher rents being secured. Incentive periods have already reduced across the market over the past two years and rents are beginning to move upwards, a first in more than 10+ years for the Aberdeen market.
With decreasing levels of supply it is even more important occupiers take professional advice early in the process and this goes for whether they wish to remain in their current premises beyond lease expiry or seeking to relocate.
Graham + Sibbald recently acted for an occupier client in securing a 28,647 sq. ft refurbished industrial unit – the largest industrial letting of 2024 thus far.
What are the opportunities and challenges for developers/investors in the market?
With the costs of construction remaining stubbornly high in the North East, feasibility of new build projects will only be viable where there is confidence in achieving significantly higher rents to strong covenants. This will restrict speculative and design and build projects but with an increased importance by occupiers on green credentials and ESG features, this adds another factor to increasingly favouring new build development.
Graham + Sibbald are currently marketing the only speculative new build industrial unit in the market at present in Westhill, Aberdeenshire which comprises 4,400 sq. ft with dedicated yard/parking and an EPC ‘A’ rating.
The second-hand refurbishment market is seen as a real opportunity for developers to capitalise upon. Although these refurbishment costs are still significant, they can provide much needed good quality industrial space to the market with the added benefit of removing the need for demolition.
Graham + Sibbald recently acted for a client in advising on the acquisition, refurbishment and marketing of a terrace of eight industrial units with dedicated yard / parking space in Dyce and with joint agents have occupiers secured for all units within four months of practical completion.
Graham + Sibbald have an experienced commercial Agency Team providing advice and representation on all issues relating to commercial property acquisitions for occupiers, landlords and developers/investors.
