Take-up of industrial property in and around Aberdeen has reached its highest level since 2014.
Market experts attribute the increase to continued strong oil prices and a buoyant renewable-energy sector, as well as a boost from some particularly large transactions.
Commercial property giant Knight Frank is today reporting 926,140sq ft of industrial take-up across 95 deals in the Aberdeen area during 2022, up 42% on the year before.
The latest annual total is the best since 2014’s 1.33 million sq ft and well above the 10-year average of 723,819sq ft.
Scott Hogan, head of Scotland industrial and logistics, Knight Frank, said: “Last year’s take-up figures show demand for industrial property surged in Aberdeen during 2022 – albeit, this was boosted by a number of larger deals.
“Part of the rise in demand can be attributed to improving sentiment from within the energy sector and a sustained high oil price.”
A competitive market
He added: “There is still plenty of demand for industrial accommodation in the city.
“But the lack of good quality available space means there is a high level of competition for the right property – especially at the larger end of the market.
“This was somewhat reflected in the higher-than-average number of lease renewals taking place.”
Mr Hogan said these dynamics also helped push up the average lease length last year.
Prime rents are holding up well but ongoing high build costs mean market conditions are “still not right for speculative development”, he said.
He continued: “All things being equal, there are a healthy number of deals in the pipeline, along with strong inquiry levels, which should sustain the market into 2023.
“Growing interest from renewable energy companies will also add to the bedrock of the oil and gas sector as the staple of property deals in Aberdeen.”
The largest letting of last year – by Savills – was in Portlethen, a few miles south of Aberdeen, where waste company Biffa took 67,000sq ft of industrial space at a former engineering depot.
Up to 60 jobs are expected to be created under £7.7 million plans to transform the site at Badentoy Industrial Estate into a modern new bottle recycling plant that will play a key role in Scotland’s Deposit Return Scheme (DRS).
Work on the site started earlier this month, with equipment due to be installed from April. Work is expected to be completed by May ahead of the launch of DRS in August.
Five 20,000sq ft-plus lettings in 2022
Knight Frank said there were, “encouragingly”, five lettings of more than 20,000sq ft last year, two of which involved its specialists advising either the occupier or landlord.
In addition to the record level of take-up, there was “heightened lease renewal and re-gear activity”, the firm said.
It added: “Occupiers choosing to renew at their existing premises likely found that good quality relocation options were in limited supply – a factor expected to continue throughout 2023 and beyond.”
Knight Frank warned some new industrial tenants may be missing out by not seeking professional help for their property requirements.
Most industrial occupiers continue to “self-represent”, the firm said, adding: “Using the average rent agreed in Aberdeen during 2023, Knight Frank estimates that unrepresented tenants in the city are forgoing potential average savings of £13,500.”
Better industrial market mirrors uptick for offices
The industrial sector’s 2022 performance mirrors the increased activity in Aberdeen’s office market last year.
Last month Knight Frank reported office take-up in and around the Granite City had jumped by 95% between 2021 and 2022.
Energy companies accounted for about three-quarters of this activity.
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