The take-up of industrial space in and around Aberdeen rocketed by 23.5% in the first half of the year, to 361,377sq ft.
According to Granite City-based market experts Paul Richardson, and Iain Landsman, the industrial market in Aberdeen is currently performing better than all other commercial property sectors.
Mr Richardson, a partner in Ryden’s Aberdeen office, added: “There is a little bit more confidence in the oil and gas market than we’ve seen in a while, with companies back to making money again, rather than losing it.
“It’s a very different marketplace, compared with last year. In the first quarter of 2021, there was just under 150,000sq ft transacted. In the second quarter, there was more than 211,000sq ft. These sorts of figures show there are plenty of grounds for optimism in the market.
“Looking at the deals currently under offer, we are hoping this trend will continue, although it will remain a challenging market for the next three to six months.
“Companies are now getting the ‘new normal’, and the prospect of having more people back into offices is also going to give certainty. Overall, it’s an improving market now the oil prices have stabilised.
“Oil and gas companies are looking for new buildings – shiny new-build sheds do come with a premium, but there is downward pressure on the second-hand market and the differential there has increased significantly.”
Mr Landsman, associate director in CBRE’s Aberdeen office, said: “The phrase ‘energy transition’ has been bandied about a lot but there is also a need for the industrial market to transition.
Parts of Aberdeen – “core industrial sites like Altens and Dyce” – are prime targets for “repurposing”, he added.
Might Aldi break the mould?
Mr Landsman highlighted discount retailer Aldi potentially taking over the site of old offices on Hareness Road, Altens, as a sign the traditional boundaries of retail, office and industrial commercial property in and around Aberdeen may need to be redrawn.
Aldi is hoping to build the supermarket, which would be its fourth in the Granite City, on the site of the former City Gate offices of oil and gas services firm Amec Foster Wheeler.
The new supermarket could be open to shoppers by April 2023 in a £3.8 million-plus development expected to directly create up to 35 jobs, plus more during the construction period and through expansion of the fast-growing grocer’s supply chain.
Mr Landsman said Aberdeen City Council had “historically always pushed against out-of-town retail”, but allowing the new Aldi could pave the way for a more flexible approach to local planning.
And finding alternative uses for redundant office space “does nothing to diminish” the retailing “core” of Union Street, he added.
Meanwhile, Mr Richardson said trade counter chains like The Paint Shed and Toolstation, which both recently took space in Westhill, were “keen to get into Aberdeen” and seeking “quality product in roadside positions”.
Mr Landsman urged planning officials and councilors to “look at the wider picture” when considering new out-of-town developments – such as trade counters and drive-thru establishments – and their potential for generating economic growth in the city.
The CBRE man added: “Aberdeen’s industrial market is definitely still challenging, but I am very positive and optimistic things are on an upward trend.
“Traditionally the second half of the year is more buoyant so it’s been a positive that H1 2021 is up 23.5% on H1 2020.”
According to Ryden and CBRE, there have been 44 industrial transactions in the Aberdeen area during the year to date and smaller deals have continued to dominate the market. The average deal size is 8,213sq ft, with 73% of all deals have been for industrial space of smaller than 10,000sq ft.
Coretrax (taking 36,624sq ft at Portlethen, and Kenway Tyres – 35,066sq ft on York Place, Aberdeen – are among the larger deals this year.
‘Potential for further growth’
Mr Landsman said: “The general feeling is that activity in the Aberdeen industrial market will remain steady. There’s scope that the next phase of the market with energy transition will see potential for further growth.
“Although there is still a noted over-supply of warehousing, much of the vacant stock is of an age and quality that it’s coming to the end of its useable shelf life. Demand for the best quality kit remains healthy and, as such, prime rents have remained.”