Industrial and distribution occupiers’ preference for West Lothian continues. Firms are expanding and inward investors are moving in, writes Ian Wylie.
It is not just politicians who are pondering the “West Lothian” question. Property agents also are wondering when, if ever, the bubble will burst in towns like Livingston that continue to attract the lion’s share of new industrial business in and around the Edinburgh area.
A new survey, carried out by Ryden for Lothian & Edinburgh Enterprise Ltd (LEEL), reveals a surge in demand for industrial property in the region: 52% of industrial occupiers are considering relocation, and 20% are definitely expanding or relocating.
This is backed up by EG’s own research, published in the Scotland Occupier supplement in April, which revealed that nearly 30% of industrial and distribution occupiers were considering taking more space this year, – the figures show that demand totals 38,052m2 (409,600 sq ft).
The same LEEL report reveals that the supply of new industrial floorspace is still less than half its peak level, which was reached in the 1980s. In 1981, for example, 16 private-sector developers were active in the Lothian market. Today just seven are active, although three of the four local councils are undertaking some development.
Jim McFarlane, LEEL’s director of property and environment, believes that the survey reflects a buoyant Lothian economy and strong returns on investment. According to LEEL, returns from Lothian industrial property have averaged 11.8% compared with a UK average of 10.8%.
The West Lothian revival, sparked by the former Livingston Development Corporation, continues to gather momentum. The region’s development area status has been influential in attracting recent inward investment projects such as Shin-Etsu and Nikon to Livingston, following hard on the heels of Motorola, NEC and Digital.
West Lothian’s proximity to Glasgow and the Forth Road Bridge is also a key strength. And, at 983ha (2,429 acres), West Lothian’s stock of recognised industrial estates is not only the region’s largest but also includes some of the best-quality facilities.
Transformation
“Livingston is still the place to be. The former LDC worked very hard to convert what was a fairly dowdy new town into an IT and electronics centre,” says Chris MacFarlane of King Sturge. He puts rents in Livingston at £38-£48 per m2 (£3.50-£4.50 per sq ft).
The outlook for West Lothian is also bright, boasting more than 288.6ha (713 acres) of development land with another 129.1ha (319 acres) likely to become available within the next 12 months. West Lothian is also expected to benefit from the inward investment of Hyundai, just north of the Forth at Dunfermline, as suppliers seek to locate nearby.
In contrast, the LEEL survey reveals that the supply of industrial floorspace in Edinburgh has fallen by more than a third in the past five years. Agents admit that the quality of Edinburgh’s larger industrial estates is average, with little recent new development. According to Roy Durie of Ryden, there has been a notable increase in uptake over the past 12 months, but this has been mostly because of relocations and expansions.
In particular, the high demand for residential land in central Edinburgh is spurring a number of owner-occupiers to relocate to outlying areas such as Loanhead, Newbridge or even Livingston.
Edinburgh’s prime industrial areas are still South Gyle and around the City Bypass. Durie, however, is concerned that land prices are getting too high to permit commercially viable industrial development.
New developments by Edinburgh Development & Investment are expected to meet some of the demand from larger-scale users in the coming 12 months.
At South Gyle Crescent, EDI and Edinburgh city council have completed the first phase of a 2,323m2 (25,000 sq ft) scheme capable of being subdivided, with rents being quoted at about £59 per m2 (£5.50 per sq ft), according to King Sturge. The A1 Industrial Park near Portobello on the east side of the city is a joint venture between EDI and Smarts and a first phase of 2,787m2 (30,000 sq ft) is on site with rents quoted at about £51 per m2 (£4.75 per sq ft).
Edinburgh still suffers from a shortage of good-quality development land, which has prompted a number of developers to buy strategic sites. Upland Tilloch Properties, for example, has acquired 6.1ha (15 acres) adjacent to the Newbridge Interchange of the M8 and M9 and is seeking planning permission for a warehousing scheme of 18,580m2 (200,000 sq ft).
Industrial investment interest remains high, and short supplies have encouraged some bullish yields. King Sturge reports particularly strong investor demand for smaller units close to the city centre.
Market constrained
“English investors seem less worried by Scottish law and by left-wing local authorities than they were five or 10 years ago,” comments Ryden’s Durie. The market in Mid Lothian is also constrained by lack of supply and, aside from industrial estates at Loanhead and Dalkeith, quality is, at best, average.
However, the City Bypass has increased the number of development opportunities in towns such as Bilston. “I think Mid Lothian is going to do well over the next couple of years because people are beginning to realise that it’s only 10 minutes to South Gyle,” says Durie.
Aside from Mitsubishi in Haddington, East Lothian is the least well-developed area within the region and has the smallest stock of industrial floorspace. Rents, according to Ryden, are almost 20% less in East Lothian than they are west of Edinburgh. The LEEL survey also suggests that a higher proportion of existing occupiers in East Lothian are actively seeking to relocate.
Limited prospects
Until A1 improvements are given the green light, prospects for East Lothian are limited. But Durie sees a glimmer of hope in rail transport. “We are more likely to see a revival of rail freight in Scotland than anywhere else and if Railtrack gets its act together, East Lothian could benefit, since most of the rail connections are on the east side of Edinburgh,” he says.
Durie is particularly disappointed by the raising of stamp duty by a Scottish Chancellor. “Gordon Brown is a Scotsman, but he has become too immersed in the City of London to realise that it’s only the market in the South East that is becoming overheated,” he says.
Agents also have mixed feelings about devolution. “A tartan tax might scare off price-sensitive Korean, Japanese and American companies,” warns Durie, but MacFarlane is more optimistic. “At least an Edinburgh parliament might mean a more structured industrial policy aimed at encouraging indigenous companies,” he says.
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South Gyle Crescent, Edinburgh: Premier Property Group has sold a 1,347m2 (14,500 sq ft) warehouse, which is let to Scottish Equitable, to Honeywell Pension Fund at a price reflecting an initial yield of 7.5%. Honeywell was represented by DTZ Debenham Thorpe. King Sturge and DM Hall acted as joint agents for Scottish Equitable. Eastern Industrial Estate, Newcraighall Road, Edinburgh: Rowlinson (Scotland) has let a 3,874m2 (41,700 sq ft) warehouse to ASL Trading at £38 per m2 (£3.50 per sq ft). Ryden advised Rowlinson. Hillier Parker acted for ASL Trading. Houstoun Industrial Estate, Livingston: Booker has completed a sale and leaseback of its 26,012m2 (280,000 sq ft) distribution depot to Equitable Life, reflecting an initial yield of 7.9%. Ryden represented Equitable Life. |
