Take-up of industrial property in Aberdeen surged to its highest level in almost a decade last year, as a high oil price and greater interest in renewables boosted activity in the energy sector and its supply chain, according to Knight Frank.
The independent commercial property consultancy’s analysis found that the Granite City saw 926,140 sq. ft. of take-up across 95 deals during 2022, up 42% on the previous 12 months. The figure was also the highest since 2014’s 1.33 million sq. ft. and well above the 10-year average of 723,819 sq. ft.
The largest letting of the year was in Portlethen, with a waste company taking 67,000 sq. ft. of industrial space. Encouragingly, there were five lettings over 20,000 sq. ft. during 2022, two of which involved Knight Frank advising either the occupier or landlord.
In addition to the record level of take-up, there was heightened lease renewal and re-gear activity. 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.
The majority of occupiers continue to self-represent when taking new space, despite research suggesting they can achieve 47% greater incentive periods through professional representation. 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.
The industrial sector’s performance mirrors the improved activity levels recorded in Aberdeen’s office market. Last month, Knight Frank reported that office take-up had increased 95% between 2021 and 2022, with energy companies accounting for around three-quarters of activity.
Scott Hogan, head of Scotland industrial and logistics at 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.
“There is still plenty of demand for industrial accommodation in the city, but the lack of good quality available space means that 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.
“These dynamics also helped push up the average lease length last year and prime rents continue to hold up. However, continued high build costs mean market conditions are still not right for speculative development.
“All things being equal, there are a healthy number of deals in the pipeline, along with strong enquiry 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.”